Icahn Increases Stake in Occidental to 10% -- WSJ
March 12 2020 - 3:02AM
Dow Jones News
By 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 (March 12, 2020).
Carl Icahn has doubled down on a fight to take control of
Occidental Petroleum Corp., buying up more shares of the embattled
oil-and-gas producer in recent days as its stock price
plummets.
The billionaire shareholder activist now owns almost 10% of
Occidental, he said in an interview Wednesday. He held a roughly
2.5% stake as of the end of last year.
For almost a year, Mr. Icahn has been loudly criticizing
Occidental's $38 billion acquisition of Anadarko Petroleum Corp.
and campaigning for the ouster of Chief Executive Vicki Hollub, the
main architect of the deal. Occidental outbid its much-larger rival
Chevron Corp., relying on $10 billion of pricey financing from
another octogenarian billionaire investor, Warren Buffett.
Occidental's market value has shrunk to less than $11 billion
from more than $46 billion just before the deal was struck, hurt by
doubts about the transaction and more recently the plunge in the
stock and oil markets. According to Mr. Icahn's calculations,
taking into account extra stock issued to pay for the deal,
shareholders have lost even more.
"One thing I've learned in life is not to let people manage your
affairs who are delusional enough to think they could outbid
Chevron and outsmart Buffett," Mr. Icahn said. "And yet this is
just what the board has done, and it cost the shareholders $47
billion."
He is seeking to replace Occidental's entire board, which
includes Ms. Hollub, at its annual meeting this spring.
Occidental had no immediate comment Wednesday evening.
Ms. Hollub said on an earnings call last month that Chairman
Gene Batchelder would step down and that another director wouldn't
stand for re-election. The company had previously added Andrew
Gould, the former CEO of Schlumberger Ltd., and a former BlackRock
Inc. portfolio manager to its board. It had also set up a hedge to
protect against a downturn in oil prices, though not one as fierce
as the one that is occurring now.
Other large shareholders of the Houston company -- including T.
Rowe Price Group and Dodge & Cox, which together hold roughly
14% of its shares -- are also frustrated with management, according
to people familiar with the matter.
T. Rowe publicly criticized Occidental last year over the
Anadarko deal and voted against Ms. Hollub and the company's other
board members at last year's annual meeting, as did more
shareholders than is typical for those types of votes. Other large
institutional investors, including BlackRock, State Street Corp.
and Dodge & Cox, voted for the company's board last year.
Many shale producers including Occidental were struggling to
turn a profit even before the coronavirus and tension among big
oil-producing states sent crude prices down sharply. Occidental is
particularly vulnerable given its high debt level -- roughly $40
billion at last count.
Occidental said earlier this week it would slash spending and
cut its quarterly dividend to 11 cents a share from 79 cents. Ms.
Hollub at the time said the changes would allow the company to
break even with U.S. benchmark oil prices in the low $30s a barrel
-- about where they are now.
While Mr. Icahn has been pushing the company to consider putting
itself up for sale -- and suggested the Anadarko deal was a
defensive move to avoid being acquired -- he says he is now focused
on installing a board that will be able to hold management
accountable and, should oil prices recover, let shareholders decide
if they wish to sell.
Occidental has so far been a losing bet for Mr. Icahn, though he
has in the past persevered when investments soured and ended up in
the black. He bought his first roughly 33 million shares for about
$55.56 each, according to FactSet, and has lost an estimated $1
billion so far. In November, he said he sold about a third of his
shares because the stock had become too risky.
Occidental's shares fell 18% Wednesday to $11.80.
"I'm just glad I can afford to quadruple down," Mr. Icahn
said.
--Corrie Driebusch and Christopher M. Matthews contributed to
this article.
Write to Cara Lombardo at cara.lombardo@wsj.com
(END) Dow Jones Newswires
March 12, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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