The biggest shareholder of EnerCare Inc. , formerly the Consumers' Waterheater Income Fund, is preparing to battle the company for the right to nominate for its own independent directors to the firm's board.
Octavian Advisors LP, which owns 13 per cent of EnerCare, has delivered a requisition for a special meeting of shareholders in hope of expanding the company's board of directors to 10 by adding four of its own independent nominees.
The timing is a bit odd, considering that EnerCare's share price skyrocketed in November, climbing about 20 per cent since Oct. 31. Still, Octavian is going public with its battle because it says it has tried to discuss the company's strategy with management, but has been rebuffed since it first started buying shares in 2009.
The fund is particularly upset with the company's share performance over the long term. "Five years ago, EnerCare stock traded at $16 per share, almost double today's share price. Since EnerCare's IPO nine years ago, the stock is down 12 per cent versus an increase of 83 per cent for the Toronto Stock Exchange."
Octavian, which manages about $1-billion of assets, met with EnerCare on May 16 and Nov. 4 of this year. The fund says that EnerCare has tried to dismiss the poor performance as a result of all income trusts falling. Octavian says that isn't true, and noted that some trusts opted to go private, including what it says is EnerCare's closest comparable, UE Waterheater Income Fund.
"Had EnerCare's Board elected to run an active process to sell the company at that time, a similar valuation might have been achieved for EnerCare – which equates to approximately triple the current share price," the fund wrote in its letter to management.
Tim Kiladze