a) Review strategic alternatives for SE's Canadian operations (Westcoast Energy, Inc./WE) including an IPO of WE. WE is currently 100% owned by SE and files fully audited financials on SEDAR in Canada. We believe an IPO of primary shares of WE would: i) highlight the premium valuations and lower cost of capital afforded to Canadian infrastructure companies; ii) simplify SE's corporate structure by allowing market participants to consistently value the Canadian businesses (as the value of SE's ownership of WE's shares) as opposed to the uneven valuation metrics employed currently; and iii) tie WE's executive compensation to WE share price performance, thereby promoting better strategic decision-making, efficiency and accountability. Based on our analysis, we do not believe there will be negative financial or strategic implications of pursuing this structure, as currently the strategic relationship between SE's US assets and WE is limited and SE will continue to control WE through its significant share ownership; b) Review strategic alternatives for DCP Midstream LLC (DCP), including a sale/dropdown or IPO. We believe there is both strategic and financial interest in SE's DCP stake as well as the potential to highlight the value of DCP's MLP-qualifying income through an IPO. While we recognize that any strategic move would require the approval of DCP's other 50% owner, Phillips 66 (PSX), there are certain self-help actions that can be taken by SE to unlock DCP's hidden MLP valuation, namely a drop-down of its DCP stake into a related, SE-controlled MLP; c) Implement operational cost cuts across SE's entities that will reduce inefficiencies and boost profitability as management teams are more aligned with underlying operating asset performance and their related publicly-traded shares.We presented these actions to you on May 16 th, and analyzed their financial potential, in our White Paper, a copy of which can be found here: http://www.sandellmgmt.com/news/Sandell_Group_Spectra_Analysis.pdf Based on our discussions with other shareholders and a review of sell-side research last week, we believe there is considerable support for the execution of the balance of the Plan as we have laid out in our White Paper.
Sandell Urges Spectra Energy To Take Further Steps To Unlock Value
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