Offshore drilling contractor Transocean Ltd. (RIG) said Sunday its board of directors have shot down billionaire activist investor Carl Icahn's proposal for a dividend of $4.00 per share and to nominate three candidates for election to Transocean's Board. Icahn has also proposed to repeal the company's staggered board structure.
Icahn had nominated three candidates - John Lipinski, José Alapont and Samuel Merksamer for election to Transocean's Board of Directors.
In mid-January, Transocean had revealed in a regulatory filing that Icahn and certain of his affiliates hold a minority stake of in the company, and later in January acquired additional stake in the company to become its largest shareholder with a reported 5.6 percent stake.
"Following its review and in light of these proposals, the Board believes Mr. Icahn is pursuing a highly flawed agenda focused exclusively on potentially generating temporary returns at the expense of the company's ability to operate successfully and create sustainable value over the long-term," Transocean said in a statement.
As per Swiss law, a shareholder has the right to propose a dividend at a company's annual meeting. If a majority of shareholders support the proposal, the dividend is declared, whether the company's board supports such proposal or not. Transocean had stopped paying dividend last year.
The Transocean board has recommend its shareholders to vote against Icahn's proposed dividend of $4.00 per share as well as his three director nominees, at the company's 2013 Annual General Meeting of Shareholders on May 17. However, the board does not make a voting recommendation to shareholders on the third matter.
Zug, Switzerland-based Transocean termed Icahn's proposals as being "contrary to the best interests of stakeholders." The company noted that Icahn's agenda is focused on meeting destructive short-term objectives and gains, while compromising on the company's long-term viability.
The company said Icahn's agenda ignores the cyclical and capital-intensive nature of the offshore drilling industry and is entirely contradictory to Transocean's strategy of driving long-term shareholder value through operational excellence and a responsible, balanced allocation of capital.
The company noted that "the board is focused on a balanced capital allocation strategy and does not intend to take steps that will threaten the company's long-term performance, operating flexibility and investment grade credit rating."
"Icahn's proposal for a $4.00 per share dividend would reduce the company's financial flexibility and, as such, the Board recommends a $2.24 per share dividend with the goal of future increases should business conditions warrant," Transocean added.
On Icahn's director nominees, Transocean said two of the three nominees have no oil and gas experience and none have worked in the offshore drilling industry. The company noted that the nominees are also Icahn's longtime allies or employees who have been nominated solely to execute his short-term strategy and not the interests of the company.
RIG closed Friday's regular trading session at $53.56, down $0.20 or 0.37% on a volume of 3.81 million shares.
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