Transocean has reached an agreement with activist investor Carl Icahn, who has been waging a campaign to persuade the firm to raise its dividend and elect his nominees to the board.
The world’s biggest offshore rig contractor plans to raise its dividend to $3 a share from the current level of $2.24, the company says in a joint press release with Icahn. The increase, which will cost the company about $1 bn above its last dividend payout, is below Icahn’s initial demands of $4 per share.
The company also reveals that it will recommend the re-election of Icahn-backed director Samuel Merksamer and the election of Vincent Intrieri at its 2014 shareholders’ meeting. Both Merksamer, who was elected in 2013, and Intrieri are employees of companies controlled by Icahn. Transocean adds that it will also reduce the maximum number of directors on the board to 11 from 14.
The company has further agreed to measures to cut costs by $500 mn beyond the $300 mn in cuts it has already agreed to, and will create a master limited partnership (MPL) yield vehicle at Icahn’s insistence. MLPs, usually reserved for natural resources companies, are limited partnerships that can alter the company’s taxes and dividend schedule, and more.
Icahn, in return, will recommend shareholders vote in favor of the company’s slate of board nominees and has agreed to ‘certain other proposals,’ Transocean says in the release.
‘We are pleased Icahn recognizes the changes currently under way at Transocean and the continued focus of the board and management on creating shareholder value,’ says Steven Newman, president and CEO of Transocean, in the release. ‘We anticipate that Merksamer and Intrieri will provide new perspectives and insights as the company continues to improve its long-term competitiveness and deliver value to all its stakeholders.’
Icahn says in the release that he is ‘especially happy about the commitment to pursue an MLP, raise the dividend and increase margins by $800 mn through cost-cutting and increased efficiency. I believe Transocean is now on the road to realize its great potential.’
