Occidental's Ex-CEO Drawn Into Fight -- WSJ
July 27 2019 - 3:02AM
Dow Jones News
By Christopher M. Matthews and Cara Lombardo
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 27, 2019).
Occidental Petroleum Corp. Chief Executive Vicki Hollub is eager
to move forward following her $38 billion deal to buy Anadarko
Petroleum Corp. But first she has to deal with Carl Icahn, who is
trying to bring Ms. Hollub's predecessor back into the
boardroom.
The activist investor has already pushed for four seats on
Occidental's board, arguing that Ms. Hollub ignored investors and
made costly rookie mistakes in her bid to outduel Chevron Corp. for
Anadarko. Now, he has asked Stephen Chazen, who served as
Occidental CEO until 2016, to consider being one of his board
director nominees, according to people familiar with the
matter.
Mr. Chazen didn't join Mr. Icahn's slate, but he has told Ms.
Hollub he would join the company's board if it would help clear the
impasse with Mr. Icahn, the people said. Ms. Hollub hasn't provided
an answer either way, one person said.
Mr. Icahn, who holds about $1.7 billion in Occidental shares, or
nearly 4.4%, has said Occidental botched the bidding process for
the Anadarko deal and unfairly denied shareholders a say in the
matter. Now that the deal looks likely to close next month, he
isn't trying to block it but is instead fighting for influence over
the 100-year-old company's direction.
Mr. Icahn and Ms. Hollub have spoken over the phone and once in
person in an attempt to resolve their differences, some of the
people said. But they continue to clash over the merits of the
Anadarko deal and haven't discussed a settlement, the people said.
Mr. Icahn has argued that Occidental was irresponsible for taking a
pricey loan from Berkshire Hathaway Inc.'s Warren Buffett to
finance the transaction, while Ms. Hollub has billed the deal as an
opportunity for Occidental to use its heft to cut costs when
developing Anadarko's reserves.
Mr. Chazen, who was an investment banker at Merrill Lynch before
a long career at Occidental, is now chairman and chief executive of
Magnolia Oil & Gas Corp., an independent producer. He is widely
respected in the energy world and his board candidacy could emerge
as part of a future settlement between the two sides, some of the
people said. But one potential obstacle is that, at 72, Mr. Chazen
could only serve less than three years before reaching Occidental's
mandatory board retirement age of 75.
A settlement could become more likely if Mr. Icahn is able to
garner enough investor support for a meeting to vote on his
candidates, the people said. Mr. Icahn needs shareholders
controlling at least 20% of Occidental's shares outstanding to sign
off on such a meeting. Because the process to write the company to
request a meeting can be arduous for shareholders, it is possible
not all sympathetic shareholders will ultimately file in
support.
Some investors, including T. Rowe Price Group Inc., have
publicly voiced frustration with Occidental for circumventing a
shareholder vote on the deal by increasing the cash portion of its
bid.
On Thursday, influential shareholder advisory firm Institutional
Shareholder Services Inc., which can sometimes sway large
shareholders, urged stockholders to support Mr. Icahn's push for a
vote.
"[T]here appears to be substantial shareholder frustration with
the board that should be addressed in a more fulsome manner," the
firm said in a note to investors.
In a statement, Occidental said it disagrees with the ISS
recommendation because Mr. Icahn's solicitation would distract the
company from the integration of Anadarko, which ISS
acknowledged.
Occidental topped Chevron in a bidding war for Anadarko in May,
winning prized assets in the heart of the Permian Basin in West
Texas and New Mexico, the country's most active drilling region.
But Occidental took on significant debt to beat deeper-pocketed
Chevron and must now swallow a company nearly its own size.
In an open letter Monday, Mr. Icahn said he believes the
Anadarko deal was a rushed attempt by Occidental to avoid becoming
an acquisition target itself. He has previously argued that
Occidental should explore selling itself. He began buying into the
stock on May 2, two days after Occidental's deal with Mr. Buffett
was announced; at the time, Occidental's shares were sliding.
Mr. Chazen saw Ms. Hollub's aggressive pursuit of Anadarko as
potentially risky, said two people familiar with his thinking. Mr.
Chazen favored small "bolt-on" transactions during his tenure and
tended to avoid big risks. But he also remains close to Ms. Hollub,
offering advice periodically and he is unlikely to pursue a hostile
board candidacy, those people said.
Mr. Chazen handpicked Ms. Hollub, an engineer by training who
worked on oil rigs right out of college and landed at Occidental in
1982. Mr. Icahn has criticized Ms. Hollub for her lack of
experience with mergers and acquisitions.
A number of large Occidental shareholders voted against board
members at the company's annual meeting in May after Anadarko
accepted its offer. Ms. Hollub received about 78% of shareholder
votes. The lowest total received by any director was about 71% of
the vote. When voting falls below 80% support, it is usually a sign
of shareholder dissatisfaction, corporate governance experts
say.
Write to Christopher M. Matthews at christopher.matthews@wsj.com
and Cara Lombardo at cara.lombardo@wsj.com
(END) Dow Jones Newswires
July 27, 2019 02:47 ET (06:47 GMT)
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