Southern Union's MLP reversal

Exactly a year ago natural gas pipeline and storage firm Southern Union Co. avoided an ugly proxy fight by promising, among other things, to look into forming a master limited partnership. MLPs, a corporate tax-exempt business structure that has been all the rage for pipeline companies in the last few years (think Kinder-Morgan, El Paso Corp.and Dan Duncan’s various businesses). Southern Union went so far as to announce a planned IPO on Nov. 9 of last year.
Late Friday, however, after releasing its earnings report, SUG revealed this in its 10-k:

“In light of recent unfavorable conditions in the MLP market, including the delay or cancellation of other previously announced initial public offerings, the Company has determined to postpone filing of a registration statement until such time as market conditions improve.”

The change of plans, a big miss in the earnings Friday, a lack of quarterly financials (the company just reported the full-year) hasn’t helped the stock, which this afternoon was down more than 13 percent from Friday morning.
In a note today Becca Followill of Tudor Pickering Holt & Co. summed up the developments like this: “Yikes! Messy all the way around.”
She continued by saying pulling the MLP makes sense because “… SUG still doesn’t have a dedicated leader for that business, performance has been spotty, and the MLP market is difficult.”
But that doesn’t mean the company’s off the hook from the pressures from investors to improve performance. Sandell Asset Management, the shareholders that agitated for change last year, still owns 9.79 percent of SUG.
“Status quo is not an option if SUG wants higher stock price,” Followill’s note said.

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