NiSource step closer to big changes
Stock surges in aftermath of Neale's resignation
BY KEITH BENMAN
kbenman@nwitimes.com
219.933.3326
Gary Neale's surrendering of his last leadership role at NiSource Inc. has industry watchers anticipating a major company restructuring that could be set in motion by early next year.
Ian Rolland, the company's longest-serving board member, replaced Neale as company chairman Wednesday. Last year, Neale was replaced as CEO and president by Robert Skaggs Jr.
"It's just another step in a planning process that is going on at NiSource," said Paul Justice, an equities analyst with investment-research firm Morningstar Inc. "When we saw Skaggs come in as CEO, it was just a matter of time before Neale went down."
This spring, Skaggs announced the company was undergoing a "strategic financial review." Since then, the new CEO has not ruled out unwinding the 2000 merger with Columbia Energy Group or other drastic steps in his effort to create more shareholder value.
Shareholders gained some value Wednesday, as the stock surged to one of its larger one-day gains of the year.
NiSource shares closed at $24.59 Wednesday, a gain of almost 3 percent from Tuesday's closing price of $23.89. Trading was very heavy at 3.12 million shares. NiSource's leadership change was announced after the close of trading Tuesday.
"I've seen that before, where the company struggles for a long period of time and there's a pitching change, and suddenly the stock goes up," said Philip Adams, a senior bond analyst with Gimme Credit, a provider of independent credit research.
NiSource spokeswoman Kris Falzone said Neale's stepping down was unrelated to the board's current deliberations on the company's path forward.
"Gary's decision is unrelated to the strategic financial review," Falzone said.
NiSource is the parent of Northern Indiana Public Service Co., the largest utility in Indiana with 445,000 electric and 712,000 natural gas customers.
NiSource stock has gained more than 15 percent since the beginning of this year. But it has sagged badly over the last five years, with gains trailing behind utility sector averages.
The separating of the chairman's office from that of CEO's post at NiSource has also been a positive step, according to Justice.
"When Neale was in power, he was in absolute control of the company and he took a couple of steps that might not have been in the best interests of the company," said Justice.
In particular, people have questioned the hostile takeover of Columbia Energy in 2000, which saddled the company with more than $6 billion in debt. The Millenium pipeline project in New York has also suffered long delays and the Whiting Clean Energy plant continues to be a drain on earnings.
Neale will continue to serve on the NiSource board of directors until May.
Since the beginning of the year, Neale has been selling off large batches of his holdings in NiSource stock, starting with the sale of 263,172 shares on Jan. 3, which yielded $5.53 million in proceeds.
Neale continued selling stock and exercising options throughout the year. As of Nov. 15, Neale's direct holdings had dropped to 411,957 shares. Those shares would have had a value of more than $9.85 million at the Nov. 15 closing price of $23.90.
Analysts said Neale's sales appear to be unrelated to the action at NiSource's boardroom. Instead, they attributed it to a retiree's need to diversify his portfolio.
Falzone also said the stock sales were Neale's own personal effort to diversify his investments.
"Even with those sales, he still maintains a significant position in NiSource stock," Falzone said.