Log in
Log in
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     
Sign up
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     
News: Latest News
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance Pro.CalendarSectors 
All NewsEconomyCurrencies & ForexCryptocurrenciesCybersecurityPress Releases

Exclusive: Activist investor Sandell urges swap on DCP Midstream

10/28/2013 | 09:11am EDT

HOUSTON (Reuters) - Activist investor Sandell Asset Management is urging Spectra Energy Corp (>> Spectra Energy Corp.) to swap its interest in DCP Midstream Partners LLC for equity in Phillips 66's (>> Phillips 66) master limited partnership (MLP) in a deal meant to improve the valuations of the companies, according to a letter seen by Reuters.

HOUSTON (Reuters) - Activist investor Sandell Asset Management is urging Spectra Energy Corp (>> Spectra Energy Corp.) to swap its interest in DCP Midstream Partners LLC for equity in Phillips 66's (>> Phillips 66) master limited partnership (MLP) in a deal meant to improve the valuations of the companies, according to a letter seen by Reuters.

Sandell, which owns less than 1 percent of pipeline company Spectra and 1 percent of refining company Phillips 66, said in a letter dated October 2 it believed DCP Midstream's assets are a better fit with Phillips. DCP Midstream is jointly owned by Spectra and Phillips 66.

Asset management firm Sandell has recommended to executives at both companies that Spectra transfer its 50 percent interest in DCP Midstream to Phillips' master limited partnership (MLP), Phillips 66 Partners LP (>> Phillips 66 Partners LP). In exchange, Spectra would receive equity in the Phillips partnership in a tax-free transaction, according to the letter.

"The industry has been in this race to increase scale and simplify corporate structure and reduce the cost of capital," said Shreyas Gupta, senior managing director and portfolio manager at Sandell.

Spectra and Phillips 66 declined to comment on the proposed transaction but said in a statement they regularly look for ways to enhance the value of DCP Midstream.

U.S. energy companies that own the infrastructure needed to process and move oil and gas frequently form MLPs, structures favored by energy companies for tax efficiency and a lower cost of capital.

The letter marked the second time that Sandell has pressed Spectra for changes. It said in a letter in June it believed Spectra was undervalued and should trade at about $48 per share, 33 percent above its Friday closing price of $35.95.

Spectra rose 0.4 percent to $36.08 in Monday morning New York Stock Exchange trading, while Phillips 66 added 1.2 percent to $64.12.

Last week, Devon Energy Corp (>> Devon Energy Corp) said it would combine most of its U.S. pipeline and processing businesses with those owned by Crosstex Energy Inc (>> Crosstex Energy Inc) and Crosstex Energy LP (>> Crosstex Energy, L.P.) to form a new midstream company.

The new business will consist of two publicly traded companies, a MLP and a general partner that will control it. Devon will have a controlling stake in both entities.

(Reporting By Anna Driver; Editing by Terry Wade, Diane Craft and Jeffrey Benkoe)

By Anna Driver


© Reuters 2013
Stocks mentioned in the article
ChangeLast1st jan.
PHILLIPS 66 4.08% 88.14 Delayed Quote.16.73%
THE BANK OF NOVA SCOTIA 2.85% 67.45 Delayed Quote.-26.77%
Latest news "Economy & Forex"
12:40pNigerian oil company NNPC declares $1.55 billion after-tax profit for 2021
RE
12:38pPhilip Morris set for EU nod on Swedish Match deal, sources say
RE
12:37pU.s. natural gas futures extend gains, up by 5%…
RE
12:36pNorth Korea's latest missile launch is 'destabilizing,' White House says
RE
12:36pU.S. shale producers to remain on sidelines if OPEC+ cuts output
RE
12:34pPoland's CD Projekt works on game outside The Witcher and Cyberpunk franchises
RE
12:33pSouth Africa's utility Eskom escalates power cuts to 'Stage 4'
RE
12:26pExclusive-EU regulators to approve Philip Morris's Swedish Match deal, sources say
RE
12:24pHasbro cuts full-year revenue forecast
RE
12:23pBookrunner Says Books Are Covered In Craneware PLC Secondary ABO
RE
Latest news "Economy & Forex"