Icahn sues Occidental, threatens fight for sale of the company

By Scott Deveau and Michael Leonard on 5/30/2019

NEW YORK (Bloomberg) -- Activist investor Carl Icahn launched a lawsuit against Occidental Petroleum Corp. with the goal of potentially seeking board seats and a sale of the company.

The billionaire investor said in the suit filed Thursday in Delaware Chancery Court that he’s built a $1.6-billion stake in the company and is upset by its decision to acquire Anadarko Petroleum Corp. for $38 billion and the $10-billion financing deal it lined up from Warren Buffett’s Berkshire Hathaway Inc. without a shareholder vote.

"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.

While there’s a "close, and unfortunate, certainty" the Anadarko deal will close by the end of the year, a sale of Occidental "might still be a viable option for the stockholders," Icahn said. "It certainly should be explored by the board, as should all other feasible strategic options."

Icahn said he’s considering soliciting other shareholders to call a special meeting to potentially elect new board members. Occidental shareholders voted earlier this month to lower the threshold to call a special meeting to 15% from 25%, going against the board’s recommendation.

Occidental shares were 0.3% lower at $51.86 at 11:53 a.m. in New York, after initially rising as much as 2.3% after the suit was reported, while Anadarko fell as much as 2.5%. Representatives for both companies didn’t immediately respond to requests for comment.

The suit also questions Occidental CEO Vicki Hollub, who fended off a competing takeover offer for Anadarko from Chevron Corp., as well as her deal with Buffett. “A ninety-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. "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."

The suit also criticizes the $8.8-billion sale of Anadarko’s Africa assets to Total SA. “From all appearances it seems that Occidental sold these assets in a quickly arranged fire sale before it even owned them.”

If oil prices fall below $45, the suit says there’s “substantial risk” that Occidental will have to cut its dividend. Icahn sent a letter to Occidental on May 21 seeking records related to the deal. On May 28, Occidental responded that it was considering the demand.

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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