One of the biggest Encana Corp. shareholders says the oil and pure fuel producer’s plan to maneuver to the U.S. is “extremely discriminatory” in opposition to Canadian buyers.
Letko, Brosseau & Associates Inc., which has a stake of about four%, will vote in opposition to Encana’s plan to relocate to the U.S., the investor mentioned Tuesday in a press release. The Montreal-based agency says the transfer would power buyers holding the shares by means of listed Canadian funds or Canadian-only funding insurance policies to promote the inventory, seemingly at a loss given the place the shares at the moment are buying and selling.
“This is an instance of very poor company governance,” co-founder Peter Letko mentioned in an interview. “The firm is brazenly discriminating in opposition to sure forms of shareholders.”
Encana’s announcement of the deliberate U.S. transfer final month ratcheted up the gloom enveloping the Canadian oil business and heightened anxieties about shedding main home firms. Letko Brosseau is thus far the one investor to publicly oppose Encana’s plan, however its strongly worded assertion might encourage others to interrupt cowl. The try to preserve Encana in Canada might act as a warning shot to different firms contemplating pulling up stakes.
Over 70% of Encana’s shareholders are within the U.S., whereas 21% are in Canada, in keeping with knowledge compiled by Bloomberg.
“We don’t consider that our Canadian buyers shall be compelled to promote past the Canadian indices,” Encana mentioned in a press release, including it was dissatisfied by Letko’s remarks. “We need to expose our firm and all its stockholders to more and more bigger swimming pools of funding in U.S. index funds and passively managed accounts.”
The oil producer reiterated its expectation that the transfer will create $1 billion of further demand for its shares.
Less than 10% of Encana’s inventory is owned by passive accounts, in contrast with the 30% common for its U.S. friends, the corporate mentioned when it first introduced the plan.
Encana didn’t seek the advice of Letko Brosseau, the driller’s fourth-largest shareholder, earlier than asserting the plan. While Letko declined to say what else his agency might do to oppose the transfer, he characterised Tuesday’s assertion as a “first step.” Encana’s plan requires the approval of two-thirds of the corporate’s shareholders.
The transfer additionally was seen because the end result of a long-term technique by CEO Doug Suttles, a Texan, to shift the corporate’s focus to the south. After taking the reins in 2013, Suttles quickly set about promoting Canadian property and constructing a significant place within the U.S. by means of acquisitions. Suttles himself has already left Canada, shifting in March of final yr to Denver, the place the corporate’s new headquarters shall be positioned.
Letko says Encana’s rationalization for the transfer was mild on any strategic, enterprise or tax benefits the corporate might garner from the relocation.
“It’s clear that wasn’t very a lot on their minds,” Letko mentioned. “What may need been extra on their minds was a brief bike experience for his or her president to go to the workplace.”
Encana’s buyers have purpose to be grumpy with the inventory’s efficiency. The shares are down 48% over the previous 12 months, in contrast with the little-changed efficiency of the S&P/TSX vitality index. One of Letko Brosseau’s arguments is that the timing of Encana’s transfer would power some buyers to promote the shares at a steep loss.
Encana fell four.four% to C$5.26 in Toronto on Tuesday.
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