SCHEDULE 13D/A: Starboard Value Secures Board Seat and Governance Agreement with Algonquin Power & Utilities Corp.

Activist investor Starboard Value LP has reached a cooperation agreement with Algonquin Power & Utilities Corp., leading to a new board appointment and a mutual standstill.

Summary

• Starboard Value LP and its affiliates collectively beneficially own 66,433,000 Common Shares of Algonquin Power & Utilities Corp., representing approximately 8.7% of the outstanding shares as of December 31, 2024.
• On March 13, 2025, Starboard entered into a cooperation agreement with Algonquin Power & Utilities Corp. regarding board composition and other matters.
• The agreement stipulates the appointment of Gavin T. Molinelli (or an alternative) to the Board, contingent on Federal Energy Regulatory Commission (FERC) approval.
• Algonquin Power will nominate Gavin T. Molinelli, Brett Carter, and Christopher Lopez for election to the Board at the 2025 Annual Meeting, with terms expiring at the 2026 Annual Meeting.
• The newly appointed director will join the Corporate Governance Committee and any new strategic, transaction evaluation, or succession planning committees.
• Starboard has agreed to vote its shares in favor of all Board-nominated directors and most Board-recommended proposals at the 2025 Annual Meeting, with an exception allowing voting in line with ISS or Glass Lewis recommendations on certain proposals.
• Starboard retains discretion to vote on extraordinary transactions that would significantly dilute existing shareholders.
• Customary standstill provisions are in effect until shortly before the 2026 Annual Meeting nomination deadline, restricting Starboard from certain activist actions.
• Starboard G Fund, L.P. engaged in recent transactions, including purchases of 167,000 shares at $4.20 on January 13, 2025, 200,000 shares at $4.3030 on January 15, 2025, and 50,000 shares at $4.3310 on February 3, 2025, and a sale of 300,000 shares at $4.9610 on February 19, 2025.
• The aggregate purchase price for Starboard's beneficial ownership across various funds totals approximately $518,552,382.

Sentiment

Score: 7

Explanation: The agreement reflects a constructive resolution between an activist investor and the company, leading to board refreshment and a period of stability. While FERC approval introduces a minor contingency, the overall tone is cooperative and aims to enhance governance, which is generally positive for long-term shareholder value. The mutual non-disparagement and standstill provisions reduce immediate conflict risk.

Positives

• The agreement provides for board refreshment with the appointment of a new director, potentially bringing fresh perspectives and expertise.
• The inclusion of Appointed Directors on key committees, such as the Corporate Governance Committee and any new strategic committees, suggests enhanced oversight and alignment with shareholder interests.
• The standstill agreement provides a period of stability, preventing further public activist campaigns from Starboard, which can allow management to focus on strategic execution.
• The company's agreement to reimburse Starboard's expenses up to $80,000 indicates a cooperative resolution rather than a prolonged dispute.

Negatives

• The requirement for FERC approval for the new director's appointment introduces a potential delay or uncertainty.
• The ongoing dispute regarding Toronto Dominion Bank's indirect control person status over Starboard Value LP, while disclaimed as a "group" by Starboard, could introduce complexity or regulatory scrutiny.

Risks

• The appointment of the new director is subject to Federal Energy Regulatory Commission (FERC) approval, which could delay or prevent the appointment.
• If FERC approval is not obtained for the initial Starboard Appointee, Starboard will select an alternative, which could lead to further processes and potential delays in board composition.
• An ongoing dispute exists regarding the validity of the indirect transfer of Cowen Inc.'s ownership interest in Starboard Value LP to Toronto Dominion Bank, which could have unforeseen implications.
• The ability for Starboard to recommend a replacement director is contingent on maintaining a minimum ownership threshold (lesser of 3% or 23,024,240 shares), posing a risk if their ownership drops below this level.

Future Outlook

The document outlines a cooperation agreement that sets the framework for Starboard's engagement with Algonquin Power & Utilities Corp. through the 2026 Annual Meeting. This includes specific commitments regarding board composition, voting, and a standstill period, indicating a path for collaborative governance and strategic focus for the near future. The agreement supersedes a previous one, suggesting an updated and potentially more defined relationship.

Management Comments

• The Company agreed to appoint Gavin T. Molinelli (or an alternative) to the Board, immediately following FERC approval.
• The Company agreed to nominate Gavin T. Molinelli, Brett Carter, and Christopher Lopez for election at the 2025 Annual Meeting and recommend, support, and solicit proxies for them.
• The Company agreed to appoint the New Director to the Corporate Governance Committee and any new strategic committees.
• The Company agreed that the Board size will not exceed ten (10) directors until the New Director's appointment/election, and then not exceed eleven (11) directors during the Standstill Period, without Starboard's consent.
• The Company and Starboard made customary representations and agreed to mutual non-disparagement provisions.

Industry Context

This filing is typical of activist investor engagement in the utility sector, where long-term stability, regulatory compliance, and capital allocation are critical. Starboard Value LP, known for its activist campaigns, is seeking to influence corporate governance and potentially strategic direction at Algonquin Power & Utilities Corp., a diversified utility company. Such agreements often aim to unlock shareholder value through operational improvements, asset optimization, or capital structure adjustments, common themes in the utility industry facing evolving regulatory landscapes and infrastructure investment needs.

Comparison to Industry Standards

• The agreement to appoint an activist-nominated director to the board and key committees is a common outcome in activist campaigns, aligning with best practices for board refreshment and enhanced shareholder representation.
• The mutual non-disparagement clause and standstill agreement are standard features of cooperation agreements between companies and activist investors, designed to reduce public conflict and foster a more constructive working relationship.
• The requirement for FERC approval for a board appointment is specific to regulated utility companies like Algonquin Power & Utilities Corp., reflecting the unique regulatory oversight in the energy sector, which is a standard hurdle for such changes in this industry.
• The voting agreement, allowing Starboard to vote with ISS or Glass Lewis recommendations on certain proposals, is a common concession in cooperation agreements, acknowledging the influence of proxy advisory firms.

Management Changes

Corporate Governance

Legal Proceedings

• The validity of the indirect transfer of Cowen Inc.'s ownership interest in Starboard Value LP to Toronto Dominion Bank is subject to an ongoing dispute.

Stakeholder Impact

• Shareholders: The agreement aims to enhance corporate governance and potentially unlock shareholder value through board refreshment and strategic alignment. The standstill period provides stability.
• Management: The agreement defines the terms of engagement with a significant activist investor, providing clarity and a framework for collaboration, but also imposing certain constraints on board size and composition.
• Regulators (FERC): The agreement highlights the critical role of FERC approval for board appointments in regulated utility companies, underscoring regulatory oversight in the sector.

Next Steps

• The Company will take necessary actions to appoint Gavin T. Molinelli (or an alternative) to the Board immediately following FERC approval.
• The Company will nominate Gavin T. Molinelli, Brett Carter, and Christopher Lopez for election at the 2025 Annual Meeting.
• The New Director will be appointed to the Corporate Governance Committee and any new strategic committees.
• Starboard will vote its shares at the 2025 Annual Meeting according to the agreement's terms.
• The Company and Starboard will issue a mutually agreed press release announcing the terms of the agreement.
• The Starboard Appointee will comply with requests for information and documentation required by FERC and other Energy Laws.
• The New Director will submit standard onboarding materials and assist with necessary filings for the Toronto Stock Exchange.
• Starboard will make any required filings or obtain approvals under Energy Law before acquiring 10% or more of the Company's outstanding Common Shares.

Key Dates

Recommendation

Keywords

Algonquin Power & Utilities Corp., Starboard Value LP, Activist Investor, Board Appointment, Corporate Governance, SEC Filing, Schedule 13D/A, Shareholder Agreement, Standstill Agreement, Utility Sector, FERC Approval, Common Shares