By David French and Svea Herbst-Bayliss
(Reuters) - MDU Resources Group Inc is confident in its current strategy, the company said on Tuesday, after activist investor Corvex Management unveiled a nearly 5% stake in the U.S. utility.
Corvex, which is controlled by Keith Meister, said in a regulatory filing late on Monday it bought shares in MDU as it believes the stock is undervalued. Corvex also wants to discuss strategic options with the board and management, and other measures to improve the company's valuation.
Last week, Bismarck, North Dakota-based MDU said it would separate its construction materials unit - Knife River Corporation - into a separate public company, with shares in the new entity to be distributed to MDU shareholders.
The company's stock price has dropped 10% in the last 52 weeks but investors reacted positively to news of the planned separation and pushed the share price higher.
In the Monday filing, Corvex called the plan to spin off Knife River a "positive first step." But Corvex also said it plans to engage with the company about additional strategic alternatives at MDU to enhance the earnings potential of the power company.
In a statement to Reuters, an MDU spokesperson said it was aware of Corvex's recent investment in the company and while it welcomed engagement from shareholders, it was confident in its current strategic direction.
Meister did not immediately respond to a request for additional comment. Unlike some other activist investors, Meister, who once worked for legendary corporate activists Carl Icahn, generally likes to keep a lower profile and talk with the board behind the scenes.
Shares of MDU, which provides electric and gas services to 1.16 million customers across eight states, were trading 1.4% higher around 1 p.m. Eastern time on Tuesday, giving the company a market capitalization of $6 billion.
The separation of Knife River is part of a broader trend of U.S. power companies to focus on their regulated businesses that investors see as steady revenues streams, as opposed to unregulated operations that rely heavily on market conditions.
New York-based Corvex has been a regular investor in U.S. utilities in recent years. In October 2020, Corvex pushed Exelon Corp (NASDAQ:EXC) to separate its regulated and unregulated power businesses, a move Exelon subsequently executed and completed in February.