Sempra Energy shares had their biggest ever intraday gain as Elliott Management Corp. and Bluescape Resources called for a sweeping overhaul, including selling the company’s Mexican and South American utilities and spinning off its US liquefied
natural gas business.
The two activist funds together hold a 4.9 percent interest in Sempra — whose assets include San Diego Gas & Electric — and said its conglomerate structure holds “no compelling strategic or financial rationale,” according to a statement. Elliott and Bluescape are calling for the company to name six new directors and review its holdings, saying there are between $11 billion and $16 billion in “readily achievable value creation”
The move comes weeks after Sempra Chief Executive Officer Jeff Martin took the helm and more than a year after Elliott and Bluescape pressured NRG Energy Inc. to cut costs, prompting the company to agree in February to divest $2.8 billion in assets. The letter appears to follow a similar blueprint, pushing to strip Sempra down to its core business.
“It sounds like what Elliott’s proposing is that they get rid of anything that’s not directly utility related,” Kit Konolige, a utility analyst at Bloomberg Intelligence, said by phone. “Generally, it’s a pretty good assumption that utilities are more valuable when they’re pure play utilities.”
Sempra surged as much as 18 percent on the news, the most on record. The stock was up 15 percent to $117 at 1:36 p.m. in New York. Before, the shares had declined 12 percent in the past year. Elliott and Bluescape said their strategy would raise the share price to between $139 and $158.
“Sempra Energy is committed to an open dialogue with all shareholders,” the company said in a statement.