CenterPoint Energy Inc. jumped the most in more than two years after activist investor Elliott Management Corp. disclosed a stake in the electric transmission and distribution company that serves the Houston area.
U.S. Federal Trade Commission notice dated Thursday shows a unit of Elliott Management, the $27 billion hedge fund run by billionaire Paul Singer, was granted approval for an acquisition involving the company. CenterPoint spokeswoman Leticia Lowe said in an e-mail that the notice was triggered “based on the amount of CNP stock they now own.”
Utilities that operate in regulated markets offer attractive returns because of stable cash flow and earnings, Paul Patterson, a New York-based analyst for Glenrock Associates LLC, said in a telephone interview. Power companies have weighed mergers and acquisitions for growth as they grapple with tepid sales and rising costs from new regulations and the need to upgrade aging infrastructure.
“The cost of capital available in the financial markets versus the returns that utilities provide from their regulated operations could provide an interesting arbitrage for some financial players,” Patterson said.
CenterPoint rose 4.9 percent to $16.94 at 12:20 p.m. in New York, after earlier rising as much as 8.2 percent, the most since March 15, 2013.
A spokesman for Elliott Management declined to comment. FTC spokeswoman Betsy Lordan did not immediately respond to a phone call seeking comment.
Houston-based CenterPoint is a public utility holding company. Through its subsidiaries, it distributes electricity and natural gas, and operates pipelines, gathering stations and power plants. Privately held Elliott Management has focused most of the hedge fund’s U.S. activist campaigns on enterprise software and hardware technology companies. The New York-based firm has occasionally expanded into other industries, including an investment in metals group Alcoa Inc., and sporting-goods retailer Cabela’s Inc.
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