By Mike Lee
Spectra Energy Corp. rejected calls from activist shareholder Sandell Asset Management Corp. to sell or spin off its Western Canadian pipelines or its stake in DCP Midstream LLC, as the company announced a value for the sale of assets to a partnership it controls.
“At this point in time, we think the structure works,” Spectra Chief Executive Officer Greg Ebel said in a phone interview today. Selling shares in the Canadian unit, known as Westcoast Energy Inc., would create tax problems and DCP Midstream’s rising cash flow will boost Spectra’s stock price, Ebel said.
Sandell, which owned 2.3 million shares of Spectra as of March 31, said last month it will seek changes to the Houston- based company’s board next year if it doesn’t take steps to increase its share price. Spectra said June 11 it would sell U.S. natural gas transmission and storage assets to a master- limited partnership it controls, Spectra Energy Partners LP, to help boost its dividend.
The so-called drop down to the partnership would be valued at more than $9.68 billion, according to data compiled by Bloomberg. Spectra said today it will receive $2.2 billion in cash, an estimated $7.48 billion worth of partnership units based on yesterday’s closing price and 3.5 million in new general partnership units from the sale. In addition, Spectra Energy Partners will assume about $2.5 billion in debt.
Spectra gained 0.5 percent to $36.19 at 10:01 a.m. in New York. Spectra Energy Partners dropped 1 percent to $43.02.
Sandell said last month it considered the sale to the partnership about a third of its plan for Spectra, which also includes cost cutting and reviewing strategic alternatives for Westcoast Energy and DCP Midstream.
“At this point in time we don’t see much in the way of benefit on that front,” Ebel said. “I never say never to anything.”
Spectra recently announced a $3 billion deal with Florida Power & Light to build a new natural gas pipeline between Alabama and Florida.