Duke Energy Corp. which closed its $17.8 billion takeover of Progress Energy Inc. Monday, announced Tuesday that Bill Johnson, the Progress CEO who was expected to lead the merged company, has resigned.
James Rogers, the head of Duke, was named CEO of the combined business effective immediately, the Charlotte, N.C.- based utility owner said in a prepared statement.
Duke announced the Progress takeover in January 2011 and said that Rogers, 64, would become executive chairman of the company with Johnson serving as president and CEO. That plan has been scrapped and the company won’t explain why, Ann Maynard Gray, Duke’s lead director, said Tuesday on a conference call.
“There’s no question that social issues play a huge role in how these mergers unfold and this latest turn of events simply highlights just how difficult they are to predict,” said Paul Patterson, a New York-based utilities analyst with Glenrock Associates LLC.
Patterson asked Rogers during a January 2011 conference call after the Progress purchase was announced how he, as executive chairman, would resolve disputes with CEO Johnson.
“Basically, Paul, we’re going to arm wrestle and you know how big Bill is and you know the outcome of that,” Rogers replied. “I would basically say that Bill is going to be CEO and he is going to be making the calls.”
Johnson, 58, is resigning “by mutual agreement,” the company said. Tom Williams, a spokesman for Duke, declined to comment on the change. Johnson has been the chairman and CEO of Raleigh, N.C.-based Progress since 2007. Duke shares fell 1.3 percent, to $68.92 each, in late-morning trading. The takeover received its final regulatory approval Monday.
“We saw this merger as a succession plan for Duke,” Angie Storozynski, a New York-based analyst for Macquarie Capital USA Inc., said. “Now Rogers is back in charge.”
The reconstituted board, which has 11 Duke members and seven from Progress, on Monday asked Rogers to remain as president and CEO after an executive session, he said Tuesday in a telephone interview. He didn’t participate in the deliberations, he said.
“I have a laser focus on making sure the key leaders from Progress feel included and part of this team,” Rogers said. The company expects to shed about 1,800 workers and about 1,200 already have accepted severance packages, he said. Some employees whose jobs are cut may be offered other positions, he said.
Rogers became Duke’s CEO in 2006 after it purchased Cinergy Corp., the Indiana-based utility owner he’d led, and became Duke chairman a year later. Under the Progress merger agreement, Rogers had a two-year contract to serve as chairman of the combined companies.
“He’s been doing it for a long time and he’s capable,” said Mark Maloney, who helps manage $4.5 billion at Manulife Asset Management US LLC in Boston, including about $1 million of Duke shares. “I’d be more concerned if there weren’t a CEO.”
Rogers and Johnson have revealed differing political views, Maloney said. Rogers is co-chairman and lead fund-raiser for this year’s Democratic National Convention in Charlotte. Johnson is more politically conservative, Maloney said.
Rogers has donated $71,600 in the past two years to political campaigns, according to OpenSecrets.org, which compiles political contributions. His donations to individual politicians have all been to Democrats, including President Barack Obama, former Virginia Gov. Tim Kaine and Sen. Mary Landrieu of Louisiana.
Progress Energy has donated $32,367 during the 2012 election cycle, with 66 percent going to Republican candidates. Duke Energy has donated $167,155 to candidates, 53 percent for Republicans, according to data compiled by Bloomberg.
With Johnson departing, Duke will need to craft a new succession plan, Andrew Smith, an analyst for St. Louis-based Edward Jones & Co. said. He rates Duke shares at hold and owns none.
Duke named Johnson to succeed Rogers after James L. Turner, former president of Duke’s U.S. utility unit, resigned in December 2010. Turner left after e-mail exchanges with an Indiana regulator surfaced as part of an investigation into alleged improper ties between the company and the state agency.
About three months after the purchase was announced, Progress disclosed unexpected damage to the containment building of its Crystal River 3 nuclear reactor while crews were completing repairs to previous damage. The plant remains shut.
Resolving the cost of the repairs to be covered by insurance, shareholders and utility customers will be the company’s third priority after cutting costs and improving efficiency as the two companies combine operations, Rogers said on a conference call with analysts.
Duke also forecast 2012 profit of $4.20 to $4.35 a share, adjusting for a 1-for-3 reverse stock split that took effect with the acquisition.