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Author: MarktFool Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120  
Subject: Duke Energy Spinoff Date: 12/10/2006 8:00 PM
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Has anyone researched the Duke Energy spinoff of its natural gas operation on Jan. 2? Both DUK management and analysts are saying this will create additional value for both the gas operation, called Spectra Engergy, and the core utility.


"At Duke, A Powerful Idea by Jack Willoughby

Summary: Duke Energy's planned January spinoff of its natural-gas operations into Spectra Energy is 'turnaround wiz' Chairman Paul Anderson's brainchild. He hopes the split will bring "full value" for its underappreciated gas assets, including 17,500 miles of pipeline. The two businesses trade differently: (1) Gas companies trade for multiples of cash flow and electrics for multiples of earnings. (2) Gas concerns command richer valuations, in part because they make use of master limited partnerships which allow them to pass tax-free cash through to investors. (3) Spectra faces fewer regulatory hurdles than electric utilities, and expansion opportunities abound due to underinvestment in pipelines and storage, and rising demand. Duke shareholders are to receive one Spectra share for every two shares of Duke common, meaning they would get Spectra stock for $8 per share. Analysts believe it could trade for double. According to analyst Nathan Judge, Duke's assets are worth about $37 a share, 17% above the recent stock price of $31. Utilities analyst John Bartlett calls Duke, "an excellent way to capitalize on both the need for new energy infrastructure and the potential for a higher valuation as the market recognizes the strength of the underlying utility business."
Barron's bottom line: After the spinoff, Duke could trade for $23 and change; Spectra, for $16.45."


I've just begun to research this and it looks good. After the spin, the nat gas company plans to spin off some of its pipelines in a master limited partnership, creating eventually three companies from DUK.

Note: in the above article, I'm not sure how he got $8 for Spectra. If the spin is 1 share Spectra per 2 shares DUK, then Spectra would be worth about $11 at current DUK price.

Anyone out there have thoughts on this?
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Author: bendit Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 84 of 120
Subject: Re: Duke Energy Spinoff Date: 12/10/2006 10:48 PM
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>>Barron's bottom line: After the spinoff, Duke could trade for $23 and change; Spectra, for $16.45."<<

isn't this below current prices? $23 + $8.22 = $31.22

I am confused.

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Author: MarktFool Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 85 of 120
Subject: Re: Duke Energy Spinoff Date: 12/11/2006 4:00 AM
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Barron's is saying that the value of DUK shares will increase from $32 (now) to about $39 after the spin, a 22% gain if you buy DUK now.

12/8 Price: $32.70

Post-Spin: $39.45 = $23 (DUK) + $16.45 (Spectra)

On this point, I'm not confused.



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Author: bendit Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 86 of 120
Subject: Re: Duke Energy Spinoff Date: 12/11/2006 9:26 AM
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yes but spectra is only .5 a share of duk. if duk goes to $23 and spectra goes to $16.45 it really means spectra is $8.22 of duk today. still confused.

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Author: MarktFool Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87 of 120
Subject: Re: Duke Energy Spinoff Date: 12/11/2006 2:24 PM
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Yes I see your point. I think Barron's is not correct on the pricing. if DUK is $23 post-spin then SE should be about the same $22-$23 based on .5 shares. We might get more clarity on the pricing this week.

SE started their road show today. I'll listen to the webcast later and post to the board if they discuss the pricing issue.

http://www.duke-energy.com/investors/events/2006/121106_webcast/

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Author: bendit Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 88 of 120
Subject: Re: Duke Energy Spinoff Date: 12/12/2006 3:20 PM
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I say say SE will initially trade at around $23 - $25...

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Author: MarktFool Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 89 of 120
Subject: Re: Duke Energy Spinoff Date: 12/15/2006 2:36 AM
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Hope so. I got SE pegged at $22.40 based on target 2007 earnings and industry multiple, and DUK pegged at $20.70 based on target 2007 earnings and 18 P/E. That brings the combined price = $31.90 where it traded at the start of December.

It was reported that James E. Rgoers, CEO of Duke Energy, bought $41.24 million of DUK stock on Nov.30 via stock options exercise and non-market transactions. Seems like a good sign.

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Author: bendit Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 91 of 120
Subject: Re: Duke Energy Spinoff Date: 12/15/2006 3:40 PM
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not really a good sign uless its open market.
i think the private market value of se is around
$33.

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