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Evergy facing hostile takeover threat from Elliott Management Company

  

Evergy, Inc. and Elliott Management Corporation, an activist hedge fund owned by billionaire Paul Singer, are seemingly at odds over the direction the Kansas City-based utility company needs to take. 

The New York-based Elliott firm owns about 11.3 million shares in Evergy, or about $760 million in market value — about a 5 percent stake. Elliott is an activist hedge fund, meaning it attempts to influence or change management and other decisions within a company through a large enough investment, and is owned by Paul Singer, dubbed the “Doomsday Investor” by New York Magazine. Elliott is known for its role in slashing companies, leading to thousands of layoffs.  

In a letter to Evergy’s board Tuesday, Jeff Rosenbaum, Elliott’s senior portfolio manager, pointed to what he called a “stock-price underperformance” since Evergy was created through a merger between Westar and KCP&L. 

“Investors are especially skeptical regarding Evergy’s current strategy of using capital to repurchase shares at the expense of increased investment in its infrastructure,” Rosenbaum said. “As we layout … increased system investment would not only provide meaningfully more value to shareholders than buybacks, but would also provide clearly superior benefits to Evergy’s customers, employees, regulators, and the broader communities Evergy’s utilities serve, in addition to helping to facilitate the Company’s deployment of renewables and reducing its carbon footprint.” 

Specifically, Elliott suggested the need for a new “highly-credentialed board- and management-level leadership” as well as a “strategic combination via a premium stock-for-stock merger.” 

“We believe either path, if executed properly, should result in high-certainty, line-of-sight equity value creation of up to $5 billion, with opportunities for significant additional value creation over time. In addition, we believe the business improvements envisioned under either path will leave Evergy better positioned to serve all of its key stakeholders, with stronger corporate governance and a greater commitment to renewable energy.”  

But Evergy said it’s “confident in our ability to deliver long-term growth and shareholder value creation through the execution of our strategic plan.” In a statement, Evergy said it’s been in discussions with Elliott since October 2019 and has retained Morgan Stanley as a financial advisor and Morgan, Lewis & Bockius LLP as legal counsel. 

An Evergy spokeswoman declined to comment further than the statement when reached.

Evergy’s statement maintained it’s on track to exceed $550 million of cumulative net cost savings through 2023 in connection to the merger. 

Elliott noted it had engaged in private conversations with Evergy over the past few months before going public with its letter to the board Tuesday because of its “interactions with management and the board to date as well as Evergy’s persistent share-price underperformance.” 

Late last year, Evergy was locked in a battle with the Public Service Commission (PSC) over an order requiring the utility company to set up a regulatory liability account for revenue and returns from a Sibley coal plant it is shuttering. In a call with the investment community in November, Evergy President and CEO Terry Bassham estimated the annual impact of the PSC’s order would be $9 million or $0.03 per share.

“We remain open to continuing our dialogue with Elliott,” Evergy said in its statement. “As we consider any opportunity, we are resolute in our commitment to serving the best interests of all Evergy stakeholders, including our shareholders, employees, customers, and the communities we serve.” 

Evergy’s stock reached a 52-week high of $70.61 Tuesday before closing at $68.67. 

The Governor’s Office did not immediately respond to a request for comment.