Encana investor blasts ‘discriminatory’ US plan

Bloomberg

One of the largest Encana Corp shareholders says the oil and natural gas producer’s plan to move to the US is “highly discriminatory” against Canadian investors.
Letko, Brosseau & Associates Inc, which has a stake of about 4%, will vote against Encana’s plan to relocate to the US, the investor said in a statement. The Montreal-based firm says the move would force investors holding the shares through indexed Canadian funds or Canadian-only investment policies to sell the stock, likely at a loss given where the shares are now trading.
“This is an example of very poor corporate governance,” co-founder Peter Letko said in an interview. “The company is openly discriminating against certain types of shareholders.”
Encana’s announcement of the planned US move last month ratcheted up the gloom enveloping the Canadian oil industry and heightened anxieties about losing major domestic companies. Letko Brosseau is so far the only investor to publicly oppose Encana’s plan, but its strongly worded statement may encourage others to break cover. The attempt to keep Encana in Canada may act as a warning shot to other companies considering pulling up stakes.
Over 70% of Encana’s shareholders are in the US, while 21% are in Canada, according to data compiled by Bloomberg.
“We do not believe that our Canadian investors will be forced to sell beyond the Canadian indices,” Encana said in a statement, adding it was disappointed by Letko’s remarks. “We want to expose our company and all its stockholders to increasingly larger pools of investment in US index funds and passively managed accounts.”
The oil producer reiterated its expectation that the move will create $1 billion of additional demand for its shares.
Less than 10% of Encana’s stock is owned by passive accounts, compared with the 30% average for its US peers, the company said when it first announced the plan.
Encana didn’t consult Letko Brosseau, the driller’s fourth-largest shareholder, before announcing the plan. While Letko declined to say what else his firm may do to oppose the move, he characterised the statement as a “first step.”