BISMARCK, N.D. - MDU Resources Group, Inc. (NYSE:MDU) has approved the spinoff of its construction services subsidiary, Everus Construction Group, in a move aimed at enhancing shareholder value and allowing both entities to focus on their core operations.
The spinoff will involve a pro rata distribution of all outstanding shares of Everus common stock to MDU Resources stockholders. For every four shares of MDU Resources common stock held, stockholders will receive one share of Everus common stock. The distribution is scheduled for 11:59 p.m. EDT on October 31, 2024, to stockholders of record as of 5 p.m. EDT on October 21, 2024.
Fractional shares of Everus will not be issued; instead, they will be sold in the open market, with the proceeds distributed in cash to those stockholders who would have received fractional shares. The spinoff is expected to be tax-free for U.S. federal income tax purposes, except for cash received in lieu of fractional shares.
A "when-issued" trading market for Everus common stock is anticipated to begin on or about October 28, 2024, on the New York Stock Exchange under the ticker symbol "ECG WI," until the distribution date. Additionally, an "ex-distribution" market for MDU Resources common stock will start on the same date under the ticker symbol "MDU WI," allowing stockholders to sell their MDU shares while retaining the right to receive Everus stock.
After the distribution, Everus will trade on the NYSE under the ticker symbol "ECG," and MDU Resources will continue trading under "MDU." The two companies will operate independently, with distinct investment identities and business operations.
Jeffrey S. Thiede, president and CEO of Everus, expressed enthusiasm for the subsidiary's future as a stand-alone entity and its position as one of the largest specialty construction services providers in the U.S. An Investor and Analyst Day is scheduled for October 17, 2024, at the NYSE, where Everus will present its investment highlights and growth prospects.
This strategic move is based on a press release statement and is subject to certain conditions, including the effectiveness of the Registration Statement on Form 10 for Everus. MDU Resources advises stockholders to consult with their advisors regarding the sale of shares with or without entitlement to Everus common stock.
In other recent news, MDU Resources Group Inc. reported strong second-quarter earnings of $60.4 million. The pipeline segment and Everus Construction Services business recorded earnings of $17.3 million and $39 million respectively. However, the utility business saw a decrease in earnings due to lower volumes and increased operational maintenance expenses. In line with its long-term payout ratio goal, the company increased its common stock dividend by 4% to 13 cents per share.
MDU Resources also announced several leadership changes. Anthony D. Foti was appointed as the company's chief legal officer and corporate secretary. The company also announced the retirement of Vice President and Chief Information Officer Peggy Link, with Dyke Boese named as her successor.
In a significant move, MDU Resources revealed plans for a tax-free spin-off of Everus, marking a shift towards a pure-play regulated energy delivery business. The company anticipates a 7% compound annual growth rate on the utility rate base and plans for $2.7 billion in regulated capital investments. These are recent developments highlighting the company's strategic focus and commitment to its core operations.
InvestingPro Insights
As MDU Resources Group prepares for the spinoff of its construction services subsidiary, Everus Construction Group, investors may find additional value in examining the company's current financial position and future prospects.
According to InvestingPro data, MDU Resources has a market capitalization of $5.53 billion and a price-to-earnings ratio of 13.62, suggesting a relatively modest valuation compared to some industry peers. The company's revenue for the last twelve months as of Q2 2024 stood at $4.4 billion, with a gross profit margin of 19.4%.
One of the InvestingPro Tips highlights that MDU has maintained dividend payments for 54 consecutive years, which may be particularly appealing to income-focused investors considering the upcoming spinoff. This long-standing commitment to shareholder returns could provide some stability as the company undergoes this significant corporate restructuring.
Another InvestingPro Tip indicates that analysts predict the company will be profitable this year, which aligns with the strategic rationale behind the spinoff to enhance shareholder value. However, it's worth noting that net income is expected to drop this year, which could be a factor in the decision to separate the construction services business.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and metrics that could provide deeper insights into MDU Resources' financial health and future prospects as it approaches this transformative event.
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