Under activist pressure, Evergy agrees to study its business and prospects of a sale
Evergy, the electric utility that serves most of the Kansas City area, announced on Monday that it has agreed with an activist investor to take another look at how it does business, as well as the possibility of a sale.
Evergy, the product of a 2018 merger of Kansas City Power & Light and Westar Energy, came under pressure earlier this year from Elliott Management Corp., an activist investor that believes Evergy’s stock should be doing better.
Elliott Management, which owns about 10 million Evergy shares, sounded its skepticism in a January letter to the utility company’s board of directors about its decision to buy back shares rather than invest in its infrastructure. Elliott Management thinks Evergy should be increasing its profits.
Elliott Management is a prominent fund manager known for buying large stakes in businesses in various industries and imposing its mandates upon management of those companies. As an example, it was also in the news Monday for its push to nominate directors to the board of social media giant Twitter Inc. in hopes of replacing its top executive, Jack Dorsey.
In Evergy’s case, Elliott Management said in January the utility company’s stock has underperformed since KCP&L and Westar merged and has been critical of Evergy’s top management. At the time, Elliott Management proposed that either Evergy submit to a business plan that would increase infrastructure investments and “optimizing operating costs” or consider a stock merger with a partner that would implement such a plan.
When KCP&L and Westar merged, both companies said the combination would help lessen the prospects of out-of-town concerns buying up either company. Evergy is a publicly traded company and, as such, can do little to stop a fund like Elliott Management from buying up large chunks of shares and wielding its influence on the utility.
Elliott Management has said its business plan for Evergy can increase value to shareholders while not raising customers’ rates. Evergy serves about 1.6 million customers in Kansas and Missouri.
Under Evergy’s agreement with Elliott Management, it is forming a committee to study both options and will announce its findings some time before June 30. The agreement also increases the number of Evergy directors from 15 to 17 to make room for former Energy Future Holdings chief executive Paul Keglevic and NRG Energy chief financial officer Kirk Andrews to join the board on March 3.
Evergy’s board will shrink back down to 13 members later this year when the terms of four current directors expire.
Keglevic and Andrews will serve on the newly formed strategic review committee with current Evergy chief executive Terry Bassham and Evergy board member Art Stall.
“Elliott recognizes our commitment to serving the best interests of all Evergy stakeholders,” Bassham said in a statement. “We welcome these new, highly qualified directors and the significant and valuable experience they bring to this effort.”
