CenterPoint Surges on Elliott Management Investment in Firm

  • FTC notice triggered by Elliott's stake in CenterPoint
  • Transmission and distribution company gains most in two years

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.

The Federal Trade Commission issued a notice dated Thursday after the $27 billion hedge fund run by billionaire Paul Singer raised its stake in the company.

The notice “is simply a disclosure they are required to make based on the amount of CNP stock they now own,” CenterPoint spokeswoman Leticia Lowe said in an e-mail response to questions.

Elliott officials are engaged in talks with CenterPoint management, according to a person familiar with the hedge fund’s plans who spoke on condition of anonymity because the talks are private. The person did not say what Elliott is seeking, or detail the size of the firm’s stake. 

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 3.4 percent to close at $16.69 in New York trading, after earlier gaining 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. Closely 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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