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Icahn to Plan Proxy Fight at Occidental After Cutting His Stake

Scott Deveau

(Bloomberg) -- Carl Icahn plans to launch a proxy fight at Occidental Petroleum Corp. following cuts to the company’s budget this week that may put its dividend at risk because of debt incurred in its $37 billion takeover of Anadarko Petroleum Corp.

The activist investor said in a letter to shareholders Friday he plans to begin his campaign ahead of Occidental’s annual general meeting next year, confirming an earlier report from Bloomberg.

“We fully intend to run a proxy fight, and if elected, work to right this teetering ship,” Icahn said in the letter.

The investor once again centered his criticisms on Occidental Chief Executive Officer Vicki Hollub and the company’s board. He argued they have overseen the erasing of more than $21 billion in market value since news broke in mid-April that Occidental would engage in a bidding war for Anadarko. He referred to the deal as the “OxyDarko Disaster.”

Icahn said he recently reduced his stake in Occidental to 23 million shares, worth roughly $900 million. He owned 33 million shares as of June 30, according to data compiled by Bloomberg.

“I have no faith in Hollub or her board, and even though I do believe that OXY owns good assets, I draw the line at exposing more than $1 billion to a CEO and board who have gambled the company to further, in my view, their own agendas –- all at the expense of stockholders,” Icahn said.

The stock gained as much as 2.2% Friday. It was up about 1% to $39.39 at 12:59 p.m. in New York trading, giving the company a market value of about $35.2 billion.

A representative for Occidental didn’t immediately respond to a request for comment.

Occidental’s stock plunged this week after Hollub slashed 2020 capital spending 40%, leaving analysts concerned there would be enough oil to meet targets for production, debt reduction and the dividend.

While Hollub said protecting the payout is her “top priority,” analysts at JPMorgan Chase & Co. said a dividend cut would be prudent given the company’s debt burden.

“The underlying assets are solid, but the free cash flow/dividend/leverage profile simply does not work,” JPMorgan’s Phil Gresh said in a note on Nov. 6. He recommended Occidental reduce the payout by two-thirds.

Icahn believes the Anadarko deal risks the future of the company if oil prices falter. He estimates that for every $1 decline in the price of a barrel of oil, the company will lose $260 million in free cash flow. Occidental’s financial position puts its dividend is at risk, he said.

The billionaire investor had previously sought to replace four Occidental board members, including Chairman Eugene Batchelder, this year but failed to win sufficient support from shareholders to push ahead.

Occidental is this year’s worst performer on the S&P 500 Energy Index.

(Updates with details from Icahn letter starting in first paragraph.)

--With assistance from Kevin Crowley.

To contact the reporter on this story: Scott Deveau in New York at sdeveau2@bloomberg.net

To contact the editors responsible for this story: Liana Baker at lbaker75@bloomberg.net, Matthew Monks, Simon Casey

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