(Updates throughout with detail, context, closing share price)
May 17 (Reuters) - Activist investor Elliott Management Corp went public on Monday with demands that Duke Energy Corp consider separating itself into three companies, a proposal the U.S. utility said was not in its best interests.
The move is the latest by the investment firm in the U.S. utilities space, having previously pushed for changes at power companies including Sempra Energy and Evergy Inc .
In a letter to Duke’s board, Elliott said the company’s separation into three regionally-focused entities — the Carolinas, Florida and the Midwest — should create $12 billion to $15 billion of near-term value for shareholders.
Such a model would also address the underperformance of the company's stock in recent years versus its peers, despite having high-quality assets, which Elliott attributed to a lack of focus on its businesses outside of the Carolinas by the Charlotte-headquartered Duke. (refini.tv/3u3gg5z)
One of the largest regulated utilities in the United States, Duke provides electricity to 7.9 million customers in six states.
In response, Duke in a statement said there was no strategic logic to breaking the company apart. The move would burden each entity with extra costs that would negatively impact services and threaten Duke’s ability to pay its shareholder dividend, it added.
While the company would review Elliott’s latest proposals, and was open to improvement, Duke said its board and management would prioritize the long-term interests of shareholders.
Duke’s shares closed Monday 0.6% lower at $102.45 each, giving the company a valuation of $79 billion.
Elliott’s push comes after news in September of an aborted offer from NextEra Energy Inc to buy Duke that would have created a utility behemoth.
By separating into three parts, it could make Duke’s Florida unit a more digestible acquisition target for NextEra - which is based in the Sunshine State - or other potential buyers. At this point though, Elliott has not asked for such a sale, according to a source familiar with the matter.
Elliott, which has not disclosed its stake in Duke, said in its statement it was among of the company’s top 10 shareholders.
The investment firm said it wanted Duke to form a board committee to evaluate the possibility of a tax-free separation of the company, as well as appoint new board members. While saying it had suggested board nominees, Elliott’s statement did not disclose how many seats it wanted.
Reporting by David French in New York and Rithika Krishna in Bengaluru; Editing by Amy Caren Daniel and Stephen Coates