Transocean BoD Urges Shareholders to Reject Icahn’s Proposals

Carl Icahn (Photo: Forbes)

Swiss-based offshore drilling contractor Transocean Ltd. yesterday  announced that its Board of Directors has reviewed the proposals submitted by Funds affiliated with Carl Icahn for vote at its 2013 Annual General Meeting of Shareholders.

Icahn, the world’s 26th richest billionaire according to the latest Forbes billionaires list, proposed a dividend of $4.00 per share and nominated three candidates (John J. Lipinski, José Maria Alapont and Samuel Merksamer) for election to Transocean’s Board of Directors. Icahn also submitted a proposal to repeal the company’s staggered board structure.

 “The Board has determined that Mr. Icahn’s dividend proposal is in direct conflict with Transocean’s disciplined capital allocation strategy, which includes maintaining a strong, flexible balance sheet and an investment grade rating on its debt; disciplined, high-return investment in the business; and the distribution of excess cash to shareholders. Specifically, the Board believes the dividend proposed by Mr. Icahn would adversely affect the company’s ability to operate and compete effectively in a cyclical and capital-intensive industry. Further, the election of Mr. Icahn’s candidates — who are hand-picked to pursue his potentially damaging short-term agenda — is not in the best interest of the company and all of its stakeholders,”  Transocean said in a press release.

The company issued the following statement upon the Board’s full review of the proposals:

“Following its review and in light of these proposals, the Board believes Mr. Icahn is pursuing a highly flawed agenda focused exclusively on potentially generating temporary returns at the expense of the company’s ability to operate successfully and create sustainable value over the long-term. His agenda ignores the cyclical and capital-intensive nature of the offshore drilling industry and is entirely contradictory to Transocean’s strategy of driving long-term shareholder value through operational excellence and a responsible, balanced allocation of capital.” 

The Board has instructed the shareholders to vote against Icahn’s  proposed dividend of $4.00 per share, adding that the Board is confident that its proposed $2.24 per share dividend, or approximately $800 million in the aggregate, will maximize long-term value creation.

The Board has also instructed shareholder to vote against Icahn’s director nominees.

Mr. Icahn’s three candidate nominees are either employed by Mr. Icahn, or are associated currently or in the past with entities in which he has a significant interest and, as such, appear to be selected by Mr. Icahn to pursue only his short-term objectives. Two of his nominees have no oil and gas experience and none have worked in the offshore drilling industry. Furthermore, Transocean’s management and the Board include individuals with substantial expertise in devising and implementing appropriate corporate and financing structures,” said the drilling contractor in the press release.

“Mr. Icahn is attempting to include on the Board his longtime allies or employees who have been nominated solely to execute his strategy without consideration for industry expertise, independence or the best interest of the company and all of its stakeholders.”

Icahn, a 77-year-old investor whose net worth is estimated at $20 billion, in January increased his stake in Transocean and now holds a 3.26% share in the company. He is also awaiting regulatory approvals which would allow him to increase his stake in Transocean to about 5%.

The drilling contractor is preparing to start paying dividends again, after a one year break.  According to Financial Times, the company stopped paying a dividend as credit rating agencies warned that its debt could lose its investment-grade status.

The 2013 Annual General Meeting of Shareholders will be held at 5 p.m., CET, on May 17, 2013, in Zug, Switzerland.

 March 18, 2013