When Duke Energy closed on its $18 billion buyout of Progress Energy last week, it became the largest U.S. power company with 7.1 million electricity customers in North Carolina, South Carolina, Florida, Indiana, Kentucky and Ohio, and 57,000 megawatts of generating capacity.
In a surprise move, though, Duke Energy said that Progress Energy CEO Bill Johnson had resigned and would not be taking the top job at the combined company as had been previously planned. Instead, Duke Energy CEO Jim Rogers, 64, will become CEO of the combined company while remaining chairman, the company said. Duke said the resignation of Johnson, 58, was by "mutual agreement."
“This is lousy corporate governance and it has very real consequences,” said Jim Cramer on CNBC’s “Mad Money,” noting that Standard & Poor’s may cut Duke’s credit rating over the “management bait-and-switch” while the both the North Carolina Utilities Commission and North Carolina Attorney General’s Office have opened an investigation.
“I’m outraged by what happened here,” Cramer said. “It’s horrendous, a total travesty, an example of the worst governance and I’m calling for investigations.”
That said, Cramer still likes Duke Energy’s stock. Despite the scandal, he thinks Duke Energy’s stock is worth owning. After all, the Charlotte, N.C.-based company offers “domestic security,” meaning it has zero exposure to Europe and its ongoing debt crisis. As avid “Mad Money” viewers know, Cramer has been recommending a lot of stocks that sport “domestic security” lately and he thinks Duke Energy fits the bill.
“When it comes to businesses that are all domestic, it doesn’t get any better than the utilities,” Cramer said. “When you have a worldwide economic slowdown, utilities will outperform and Duke is now the biggest utility in the United States.”
While Duke’s corporate governance issues don’t exactly inspire confidence, Cramer suggested it might not be so bad because “utilities pretty much run themselves.” Besides, Cramer said he’s happy with Rogers as CEO because, in his opinion, he’s proved himself to be a strong leader with a stellar track record. Since Rogers took the helm of Duke in 2006, its stock has provided an 88 percent return including reinvested dividends, which is much more than what the S&P 500 managed over the same time.
To Cramer, Duke Energy has a “nice, safe, consistent” business model with a stock that pays a juicy 4.6 percent dividend yield. So while Cramer is outraged at the CEO switcheroo, he doesn’t think it’s any reason to sell the stock.
Read on for Cramer’s 10 Stocks You Might Have Overlooked
—Reuters contributed to this report
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