Enercare, Octavian still riled

Less than three months ago, publicly listed Enercare

Inc. and Octavian Advisors LP, its largest shareholder, were locked in a proxy battle: Octavian put forward four nominees for the April 30 annual meeting to go up against the eight nominated by management.

Shareholders weren’t swayed by Octavian’s arguments and the management slate was elected.

Given the obvious animosity between the two sides at the meeting, it can be assumed Octavian is continuing with its campaign, which started late last year when it requested a special meeting.

At that time, it spoke of EnerCare’s “abysmal corporate governance” and a “string of strategic missteps,” and argued that Enercare’s shareholders “deserve better representatives committed to enhancing the value of their investment in Enercare.”

It’s understood that Octavian recently sent a letter to Enercare requesting a meeting with the board to discuss board representation. Octavian set a time limit for a response. Enercare said there is nothing it can say with respect to Octavian.

But Octavian won’t be patient forever. Indeed, a source familiar with the situation said that if Enercare refuses to enter into a constructive dialogue, Octavian is prepared to go the same route it did before and call another special meeting.

Last time, almost half the shareholders who attended the meeting voted against the current board, and Octavian believes Enercare would not squeak by again. (At that April 30 meeting, shareholders supportive of Enercare’s position and those supportive of Octavian spoke out.)

Octavian declined to comment Friday.

Meanwhile, both sides have continued along with their normal course of business: Enercare, whose business is renting out waterheaters and providing sub-metering services for electricity, heat and water to condominiums and apartments, continues to pay out 5.6¢ a month while Octavian has acquired more shares.

In a recent filing, Octavian reported it had upped its ownership by another 2.06 percentage points over the past seven months. The most recent purchases — at an average price of $9.34 a share — were made for investment purposes. Octavian now owns 13.79% of EnerCare. But it still has no board representation.

Maybe it should have held off on its latest purchases: Since the annual meeting the stock has fallen to $8.22 (Friday) from $9.56. (The one-year high was reached last March, when it traded at $10.03.) And that decline has occurred even though there has been no dramatic change in volume: Since the April 30 meeting, about 111,000 shares are traded per day, compared with 112,000 shares over the past six months.

Enercare has another matter on its hands: Two weeks ago it was served with a “notice of action.” One of its competitors claims it had “engaged in unlawful surveillance activities aimed at tracking the door-to-door sales efforts of that competitor.”

Enercare has responded. It has suspended its door-to-door customer- awareness campaign while it conducts an investigation into the allegations. In a statement, it said “our board and our executive officers believe in conducting our affairs with the utmost of integrity.”