U.S. utility MDU Resources backs its strategy after Meister's Corvex takes stake

Mdu Resources

09/08/2022 18:49

By David French and Svea Herbst-Bayliss
    Aug 9 (Reuters) - MDU Resources Group Inc  MDU.N  is
confident in its current strategy, the company said on Tuesday,
after activist investor Corvex Management unveiled a nearly 5%
stake in the U.S. utility.
    Corvex, which is controlled by Keith Meister, said in a
regulatory filing late on Monday it bought shares in MDU as it
believes the stock is undervalued. Corvex also wants to discuss
strategic options with the board and management, and other
measures to improve the company's valuation.
    Last week, Bismarck, North Dakota-based MDU said it would
separate its construction materials unit - Knife River
Corporation - into a separate public company, with shares in the
new entity to be distributed to MDU shareholders.  urn:newsml:reuters.com:*:nFWN2ZG1WJ
    The company's stock price has dropped 10% in the last 52
weeks but investors reacted positively to news of the planned
separation and pushed the share price higher. 
    In the Monday filing, Corvex called the plan to spin off
Knife River a "positive first step." But Corvex also said it
plans to engage with the company about additional strategic
alternatives at MDU to enhance the earnings potential of the
power company.
    In a statement to Reuters, an MDU spokesperson said it was
aware of Corvex's recent investment in the company and while it
welcomed engagement from shareholders, it was confident in its
current strategic direction. 
    Meister did not immediately respond to a request for
additional comment. Unlike some other activist investors,
Meister, who once worked for legendary corporate activists Carl
Icahn, generally likes to keep a lower profile and talk with the
board behind the scenes. 
    Shares of MDU, which provides electric and gas services to
1.16 million customers across eight states, were trading 1.4%
higher around 1 p.m. Eastern time on Tuesday, giving the company
a market capitalization of $6 billion. 
    The separation of Knife River is part of a broader trend of
U.S. power companies to focus on their regulated businesses that
investors see as steady revenues streams, as opposed to
unregulated operations that rely heavily on market conditions.
    New York-based Corvex has been a regular investor in U.S.
utilities in recent years. In October 2020, Corvex pushed Exelon
Corp  EXC.O  to separate its regulated and unregulated power
businesses, a move Exelon subsequently executed and completed in
February.  urn:newsml:reuters.com:*:nL1N2UD20D

 (Reporting by David French in New York and Svea Herbst-Bayliss
in Boston; Editing by Josie Kao)
 ((davidj.french@thomsonreuters.com;))