NiSource Pushed by Investor to Pursue Deal to Go Private

(Bloomberg) -- HITE Hedge Asset Management, an energy-focused hedge fund, is calling on NiSource Inc. to seek a deal to go private as a way to boost the value of the U.S. natural gas and electric utility owner.

HITE Hedge wrote NiSource's board Thursday urging it to “aggressively” pursue a transaction to go private because the public markets are undervaluing its gas distribution business, according to the letter reviewed by Bloomberg News. The hedge fund owned about 2.3 million shares of NiSource as of Sept. 30, amounting to a 0.6% stake, according to data compiled by Bloomberg.

“While public markets in the U.S. are loath to give capital to natural gas distributors, private markets are willing to both capitalize these assets at higher multiples and provide additional low-cost capital for needed investment in their service territories,” HITE Hedge wrote in its letter.

Merrillville, Indiana-based NiSource declined to comment. Its shares rose as much as 2% Thursday in New York trading before closing up 0.5% at $29.74, giving the company a market value of $11.7 billion.

The letter comes after activist investor Elliott Investment Management disclosed a position in NiSource last week. Elliott said it supported the company's move to appoint a new chief executive officer and his plan to conduct a strategic review of the business.

NiSource said Jan. 27 that Lloyd Yates will become CEO on Feb. 14, replacing Joe Hamrock, who will retire after almost a decade with the company.

Natural gas utilities are coming under increasing pressure from environmental advocates and local officials who want to combat climate change by phasing out the use of the fossil fuels.

HITE Hedge contends NiSource, with access to lower-cost capital, could accelerate its pipeline replacement and upgrade programs, further reduce methane leaks and speed development of renewable energy.