Carl Icahn Starts Proxy War Over Occidental-Anadarko Deal

Carl Icahn, one of Wall Street’s most successful investors, declared war against Occidental's management board on Thursday by filing paperwork that aims to oust and replace four board directors. Icahn said Occidental Petroleum spent too much on oil driller Anadarko Petroleum, and that the company’s directors should pay for this error with their jobs.

Icahn’s firm owns a 4.4% stake in Occidental, valued at $1.7 billion. He used his authority to name four potential replacement candidates, including two executives from his own firm.

Earlier in the year, Chevron and Occidental entered a bidding battle for Anadarko, a shale-drilling company with an advantageous position in the West Texas Permian Basin. Instead of meeting Occidental's offer, Chevron abandoned negotiations with Anadarko, leaving Occidental to make a $57 billion deal with Anadarko in May. Chevron's proposed deal was originally valued at about $48 billion.

In a filing to the SEC, Icahn said the whole situation had been mishandled from the outset. "The company's current directors have made a number of mistakes in how and at what cost they pursued the acquisition," he wrote.He filed a lawsuit in May demanding that Occidental’s books and records be made public. This started a proxy war between Icahn and Occidental. The company responded by urging all shareholders to ignore the conflict and focus on the company’s best interests by supporting the Anadarko deal. Occidental also released a filing stating: "The Board recommends that you DO NOT SIGN ANY WRITTEN REQUESTS SENT TO YOU BY THE ICAHN GROUP."

Icahn said Occidental’s dealings have “deprived” shareholders of a vote, despite the fact that the acquisition will "fundamentally transform the company's business and prospects." He also criticized Occidental for accepting financial support from Warren Buffet, who helped pay for the takeover with $10 billion in preferred stocks.

Icahn named Eugene Batchelder, Spencer Abraham, Margaret Foran, and Avedick Poladian as the main Occidental culprits for the bad deal and called for them to be replaced.

As for his own board of executives, John Hofmeister (former president of the Shell Oil Company) and Alan LeFevre (former Jarden finance chief) will also be replaced.

According to CNN, Icahn plans to nominate Nicholas Graziano and Andrew Langham as replacements. Graziano is a portfolio manager at Icahn Capital and Langham is the firm’s general counsel.

In his filing to the SEC, Icahn said he and his supporters "believe it is important to add new directors to Occidental’s Board of Directors... to oversee future extraordinary transactions like the Anadarko transaction and to ensure that they are not consummated without stockholder approval when appropriate.”

Whether Icahn’s proxy war brings him victory remains to be seen. According to Muhammed K. Ghulam, an analyst from Raymond James, it’s unlikely he’ll manage to get enough investors on his side. Still, with Carl Icahn’s business savvy, he might be able to convince shareholders to make the changes he wants.