Icahn Increases Stake in Occidental to 10% -- WSJ

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 [e-mail]

(END) Dow Jones Newswires

March 12, 2020 02:47 ET (06:47 GMT)

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