Billionaire activist investor Carl Icahn last week filed a lawsuit against Occidental Petroleum, looking for board seats and eventually a sale of the company, Kallanish Energy learns.
Icahn said in the lawsuit filed in Delaware Chancery Court he’s built a $1.6 billion stake in Houston-based Occidental, and is upset by its decision to acquire Anadarko Petroleum for $38 billion — and the $10 billion financing deal it lined up from Warren Buffett’s Berkshire Hathaway without a shareholder vote.
‘Bet-the-company deal’
“The Anadarko deal is very much a bet-the-company deal from the point of view of the common stockholders. Not consulting them on the deal was disenfranchising at a minimum,” Icahn said in the suit, Bloomberg reported.
In a prepared statement response, Occidental said it’s focused on maximizing long-term value for all shareholders. “Our acquisition of Anadarko will create a global energy leader with a highly complementary asset portfolio and a unique opportunity to deliver compelling value and returns to the shareholders of both companies,” Oxy said.
The statement also said “with respect to the (Icahn) suit seeking access to certain ‘books and records’ of Occidental, we will respond in due course.”
90-minute negotiation doesn’t cut it
The suit also questions Occidental CEO Vicki Hollub, who put down a competing takeover offer for Anadarko from Chevron, as well as her deal with Buffett.
“A 90-minute deal ‘negotiation’ with one of history’s canniest investors, is no place to gain M&A experience – at least if you care about protecting your stockholders,” the suit said.
Occidental should also consider other options, Icahn said, including potentially paying down debt more aggressively than the company’s current plans and creating a pure-play oil and gas producer focused on the best basin.
“Both Chevron and the company appear to have prized Anadarko because of its strong position in the Permian Basin,” the suit said, Bloomberg reported. “Occidental has an even stronger Permian position and there is little doubt that it could have attracted strong and competitive bids at a premium to its stock price.”
Total deal was a fire sale
The suit also criticizes the $8.8 billion sale of Anadarko’s Africa assets to the French energy major Total. “From all appearances it seems that Occidental sold these assets in a quickly arranged fire sale before it even owned them.”
Hollub herself has downplayed her experience in mergers and acquisitions, and she credited a team effort at Occidental’s annual meeting earlier this month.
“The thing you should know about me is I’m an engineer,” she said, “and I have very little experience with M&A.”
Hollub herself confirmed a tentative deal was in place with Buffett in less than 90 minutes.
Icahn hints at dividend cut
If oil prices fall below $45, the Icahn suit says there’s “substantial risk” Occidental will have to cut its dividend. Icahn sent a letter to Occidental on May 21 seeking records related to the deal.
Icahn said in the filing he believes Occidental board and management “are in far over their heads, have made numerous blunders in recent months and might continue to trip over their feet if the board is not strengthened.”
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