BOSTON, Jan 21 (Reuters) - Elliott Management sent a letter to Evergy Inc on Tuesday urging the utility to improve its performance or consider a merger, moves the hedge fund said could create as much as $5 billion in value.
Elliott, which has an economic interest of 11.3 million shares, made its letter public after having held private discussions with management for three months.
“A high-performance path can be achieved either on a standalone basis with enhanced Board oversight and management expertise or through a transaction with a respected partner,” Elliott said in the letter.
Evergy’s stock price gained more than 2% to trade at $68.65 soon after Elliott’s letter was made public.
Elliott criticized the Kansas City, Missouri-headquartered company for spending money on buying back its stock instead of investing in its systems and said its capital allocation strategy is an outlier in the industry.
Evergy was created in 2018 when Great Plains Energy Incorporated and Westar Energy, Inc. merged. The hedge fund wrote “the record of subpar execution at Great Plains unfortunately has carried over to the combined company.”
Since the merger, Elliott says the company has earmarked $3.5 billion to buy back stock, a decision which the hedge fund wrote “translates into approximately $4 billion of shareholder value destruction.”
Reporting by Svea Herbst-Bayliss; Editing by Andrea Ricci