Transocean (RIG) Stock Up on Icahn Agreement
Shares of Transocean Ltd. (RIG) closed up +1.92 or +3.59 percent to $55.37 per share on Tuesday, after the company announced it had tentatively agreed with major shareholder and activist investor Carl Icahn on a number of measures including a $3 per share dividend. Shareholders had voted against Icahn on a $4 dividend last May. Based on the approximately 361 million shares, the dividend payment once approved would total about $1.1 billion.
The company also agreed to reduce the number of members on the board of directors to 11 from 14. Shareholders in May rejected two of the three Icahn nominees but as part of the agreement will accept Vincent Intrieri, the second seat Icahn will have on the board.
Vernier, Switzerland based Transocean Ltd. is the largest offshore drilling contractor in the world. The company operates a fleet of 135 offshore drilling units with some units capable of drilling in ocean depths of up to 10,000 feet. Daily rates charged for leasing a drilling rig can average $300,000 per day, and as much as $650,000 for deep water drill rigs. Carl Icahn, the companyâ s third largest shareholder with 5.61 percent of outstanding shares, has been lobbying for changes at the company since January. At the shareholder meeting in May, shareholders fought Icahn, siding with the company rejecting a $4 dividend and two of Icahnâ s candidates to the board. In a letter Icahn wrote to shareholders in May, he stated that, "Over the past several years ... the company has conducted ill-advised mergers, employed unsuccessful development strategies and squandered the substantial cash flow generated by the business". In addition to accepting one Icahn board member, the agreement will also include a commitment to raise margins by $800 million through cutting costs, while forming a master limited partnership. Transocean is also planning on an initial public offering of a minority interest by the middle of next year. The company has already considered forming a master limited partnership with rigs leased long term and with predictable cash flows. According to Transoceanâ s Chief Financial Officer, Esa Ikaeheimonenen, more details on the master limited partnership will be revealed at an analyst conference on November 21st. With the new agreement, Icahn will get a second seat on the board and a $3 dividend payout on a large stake. â
Published on Nov 12, 2013
By Jay Hawk