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Major Encana shareholder rejects company's move to the U.S.
CALGARY – A firm that owns about four per cent of Encana says it will be voting against its proposed plan to move its headquarters from Calgary to Denver, Colorado.
Letko, Brousseau & Associates Inc., an investment firm based in Montreal, says the company's move would affect Canadian investors and put pressure on the company's shares.
"The company argues that new U.S. index fund investors would replace Canadian shareholders," Letko Brosseau said in a release. "That expectation is at best speculative, and is outweighed by the certainty of forced sales by, and significant losses for, Canadian investors."
The firm says a move to the U.S. is against the company's best interests and shows it is not concerned about its shareholders.
Letko is the fourth largest shareholder in the company.
It's unclear whether or not other shareholders will get on board to oppose the move but if they do, it's likely the move to the U.S., the name change and share consolidation won't happen.
Encana's CEO Doug Suttles, in a release on Tuesday, said he is "disappointed" by Letko's decision to not support the change.
"We have had a long relationship with Letko and most certainly appreciate their investment in our Company," he said. "Our establishment of domicile in the U.S. was carefully considered by our leadership, Board of Directors and outside advisors. The rationale for the move is crystal clear—we want to expose our Company and all its stockholders to increasingly larger pools of investment in U.S. index funds and passively managed accounts. The change in corporate domicile will not change how we run our day-to-day business, nor diminish the important role our Canadian assets play in our portfolio today."
He said he believes the move will be beneficial for all shareholders as it will provide exposure to the larger U.S. market.
Encana first announced it would be moving its headquarters on Oct. 31 and renaming itself Ovintiv Inc.
Suttles also does not anticipate any changes to its Canadian workforce.
Since Sept. 30, 2018, Encana shares have dropped by almost 70 per cent.
Encana needs 66 per cent support for the 're-domiciling' to proceed.
The vote is expected to take place in early 2020.
(With files from BNN's Tara Weber and BNN Bloomberg)