Transocean Calls Icahn's Dividend Proposal 'Overly Aggressive'

   By Saabira Chaudhuri 
 

Transocean Ltd. (RIG) defended its current dividend, after activist investor Carl Icahn submitted a proposal for the offshore-oil driller to raise the payout by 79% and also nominated three people to Transocean's board.

"The board believes that, in the context of the uncertainties the company currently faces, a larger dividend would be overly aggressive and detrimental to the company's long-term performance," Transocean said in a statement.

The Switzerland-based company currently pays a dividend of $2.24 a share, which it emphasized is sustainable and results from careful consideration of a number of relevant factors.

Mr. Icahn in January increased his stake in Transocean to 5.6% and urged the company to declare a $4-a-share dividend, saying he believed the company's shares are undervalued.

Swiss law stipulates a shareholder has the right to propose a dividend at a company's annual meeting, and the dividend would be declared upon majority-shareholder support, regardless of whether the company's board is supportive. Mr. Icahn had said he planned to propose the $4-a-share dividend at this year's annual meeting if Transocean's board didn't declare one of at least that amount.

At the time, he also said he would have additional discussions with Transocean management about the business and strategies, as well as the potential addition of shareholder-selected nominees to the board.

On Thursday, Transocean also said it would accelerate the repayment of its debt and is aiming to retire about $1 billion more in debt by the end of 2014.

The company also talked up its board members, characterizing them as "13 highly qualified directors with diverse perspectives on the industry, most of whom are independent, and all are proven business leaders with a broad and deep range of leadership experience."

Mr. Icahn has been active in energy investments in the last year, taking stakes in such companies as refiner CVR Energy Inc. (CVI) and Chesapeake Energy Corp. (CHK), the second-largest natural-gas producer in the U.S. His Chesapeake investment helped spur major corporate-governance changes at the company, including the replacement of a majority of the board.

Earlier this week, Mr. Icahn wrote a letter to the board of Dell Inc. (DELL), proposing a $9-per-share special dividend if a planned $24.4 billion leveraged buyout by founder Michael Dell fails.

Write to Saabira Chaudhuri at [e-mail]

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