Oxy leadership, Icahn trade barbs
Investor’s bid to take over board heats up
The leadership of Occidental Petroleum and activist investor Carl Icahn traded barbs Monday in competing letters sent to Oxy shareholders as the famed corporate raider’s board takeover bid heats up.
Icahn built a nearly 5 percent ownership stake in Houstonbased Oxy after he was upset with the company’s successful bidding war to acquire The Woodlandsbased Anadarko Petroleum for $38 billion. While Icahn admitted he can’t prevent the Anadarko deal from closing later this year, he could oust the Oxy leadership and sell much of its assets piece by piece if his bid is successful.
In letters sent Monday, Oxy argued that Icahn doesn’t understand the merits of the deal and that he’s attempting to name a series of unqualified representatives to the board. Icahn countered that Oxy Chief Executive Vicki Hollub and Chairman Eugene Batchelder are acting to protect only their positions, risking the holdings of Oxy shareholders in the process.
Oxy contends it is building an acreage position — especially in the booming Permian Basin — for the best long-term growth and profit, while Icahn argued that Oxy overpaid and played too fast and loose with its shareholders’ dollars.
“Oxy’s massive and risky Anadarko bet that gambles the company’s future without the approval of shareholders will prove to be grossly negligent and might possibly cause the company to lose its valuable listing on the New York Stock Exchange,” Icahn wrote, arguing that Hollub may have acted only because a weakened Oxy could have been a takeover target otherwise.
Icahn last week put forward nominees to replace four of Oxy’s 10 board members.
Oxy’s response contends that Icahn’s nominees would interfere with the integration of Anadarko’s assets and planned divestitures.
“Mr. Icahn’s own statements demonstrate that he does not understand or support the strategic and financial merits of the acquisition,” Hollub and Batchelder wrote, “and we believe that his board nominees would interfere with our ability to successfully integrate Anadarko’s valuable assets, execute our divestiture and deleveraging plan and deliver on the full promise of this acquisition at this critical juncture.”
They added, “We ask stockholders to carefully consider the destabilizing impact that the Icahn Group solicitation could have on the long-term value of your shares.”
Icahn first needs the support of holders of 20 percent of Oxy’s stock to set a date for shareholders to vote on the proposals, which is unlikely to happen before the deal is set to close later this year.
In order to outbid Chevron and secure the financing for the $38 billion deal, Hollub led a whirlwind tour to Paris to sell Anadarko’s Africa assets to the French energy major Total for $8.8 billion, and then to Nebraska to persuade Warren Buffett to commit $10 billion to help finance the purchase in exchange for a stake in the combined company. Oxy was willing to offer $5 billion more than Chevron in part because the company is one of the most efficient operators in the Permian, where Anadarko has extensive holdings, Hollub said.
Icahn is particularly critical of the Buffett deal, which gave the investor preferred shares with guaranteed returns and the option for his Berkshire Hathaway firm to buy a larger stake in Oxy.
“The Buffett deal was like taking candy from a baby and amazingly she even thanked him publicly for it!” Icahn said of Hollub.
On the other hand, Hollub and Batchelder noted that three of Icahn’s four nominees are either Icahn employees or business allies — “none of whom possess skills, experience or expertise that are additive or superior to our existing directors.”
Icahn’s nominees are former Shell Oil President John Hofmeister, Icahn Capital portfolio manager Nicholas Graziano, Icahn Enterprises general counsel Andrew Langham and Alan LeFevre, who was previously named to a board seat at Herbalife after Icahn won a proxy bid there.
The four board members that Icahn is seeking to remove are Batchelder, a retired ConocoPhillips executive; Spencer Abraham, head of the Abraham Group consulting firm; Margaret Foran, a Prudential Financial senior executive; and Avedick Poladian, a former executive at real estate investor and developer Lowe Enterprises.