Analysts say Icahn’s involvement may foreshadow ‘shareholder activism in sector’
Billionaire investor Carl Icahn has taken a stake of 3.26 percent in Transocean, the company that owns the Deepwater Horizon rig that sank in an explosion in the Gulf of Mexico in 2010, prompting the region’s worst ever environmental disaster while under contract to UK oil company BP.
Icahn is also seeking regulatory approval to buy a holding of 5 percent, worth $682.1 mn, which would make him the group’s largest single shareholder, and analysts speculate that the billionaire would seek a board seat at the company and push for renewal of dividend payments.
Icahn has issued no formal statement outlining his intentions in acquiring the stake but the Financial Times, citing ‘people familiar with the situation’, reports that Icahn ‘is expected to meet Transocean senior management soon to discuss his expectations for the company.’
Equity analysts at Citigroup speculate that Icahn’s purchase of the stake in the company ‘raises the prospects of shareholder activism in the sector’, according to a quote in Forbes Magazine.
‘Activist investors are honing in on the low valuations of offshore drilling companies at a time of robust demand for deep-water rigs, which has led to record-high day rates and a lengthening of contract terms,’ say the analysts.
Citigroup adds that Transocean is the only one of the seven offshore drillers the analysts cover that does not pay dividends. Seadrill pays a dividend of 9 percent while Diamond Offshore pays 4.5 percent, according to the analysts. Offshore drillers Noble Corp and Rowan Companies pay dividends of between 1.2 percent and 1.5 percent.
Brian Maddox, a consultant acting as spokesperson for Transocean, says in an email to Bloomberg News that Transocean is looking forward to ‘engaging in dialogue’ with Icahn.
Bloomberg paraphrases him as saying ‘the company is focused on its plan to improve operations and the quality of its rig fleet, while the recent Macondo legal agreement puts Transocean on a path toward more shareholder value.’
