– activists face dog-that-caught-the-car challenges. They’ve bought businesses that, for one reason or another, were valued at a discount to peers, on the thesis that selling divisions would improve the stock price.New York-based Starboard launched its campaign at Algonquin
Two other activists – Ancora Holdings Group LLC and Corvex Management – are also significant investors in Oakville, Ont.-based Algonquin. The company is already in the midst of a strategic review, launched by the board in May, aimed at paying down debt by selling divisions. For example, in its letter, Starboard estimated Algonquin could vend its power plants, including facilities in Texas, for 12 times their earnings before interest, taxes, depreciation and amortization .
“We believe that spinning out or divesting the assets in the current environment may not lead to a sustainable higher Algonquin share price,” said Nelson Ng, at RBC Capital Markets, in a report. CIBC Capital Markets’ Mark Jarvi took the same view, saying in a report: “Algonquin shouldn’t rush to sell all its power assets – it could potentially wait for better market conditions.