Encana Investor to Vote Against Plan to Flee Canada
(Bloomberg) -- One of the largest investors in Encana Corp. said it will vote against the Canadian oil producer’s plan to move its headquarters to the U.S.
Letko, Brosseau & Associates Inc., which has a stake of about 4%, said Tuesday the proposal would force investors holding Encana shares through indexed Canadian funds or via Canadian-only investment policies to sell the stock. It also questioned Encana’s argument that new U.S. index fund investors would replace Canadian shareholders. Representatives of Encana didn’t immediately return messages seeking a response to Letko Brosseau.
- Encana’s plan to move south of the border and rename itself Ovintiv Inc., announced last month, ratcheted up the gloom enveloping the Canadian oil industry and heightened anxieties about losing major domestic companies. Montreal-based Letko Brosseau’s attempt to keep Encana in Canada may act as a warning shot to other companies considering pulling up stakes.
- Letko Brosseau is so far the only investor to publicly oppose Encana’s plan, but it’s strongly worded statement may encourage others to break cover. It said Encana’s effort to re-domicile “reflects a profound absence of concern for the protection and enhancement of shareholder value.”
- Encana’s investors have reason to be grumpy with the stock’s performance. The shares are down 47% over the past 12 months, compared with the little-changed performance of the S&P/TSX energy index. One of Letko Brosseau’s arguments is that the timing of Encana’s move would force some investors to sell the shares at a steep loss.
The shares had little reaction to Letko Brosseau’s statement. Encana was down 3.6% at C$5.30 as of 1:59 p.m. in Toronto trading, 3 cents higher than they were when the firm’s statement was released.
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