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Carl Icahn Is Going All Out against Occidental-Anadarko Deal

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Jun. 6 2019, Updated 7:31 a.m. ET

Carl Icahn’s lawsuit against Occidental Petroleum

As we highlighted in Could Occidental’s Offer for Anadarko Pit Buffett against Icahn, billionaire investor Carl Icahn built a small stake in Occidental Petroleum (OXY) amid OXY’s bidding war for Anadarko Petroleum (APC). As Reuters reported, last week, Icahn sued Occidental Petroleum to gain access to corporate records related to the hugely overpriced Anadarko deal. His lawsuit calls Occidental’s purchase of Anadarko for $38 billion, “fundamentally misguided and hugely overpriced.”

He has also signaled that he may try to replace Occidental’s board of directors and press for sale of assets. Chevron (CVX) was also initially in the bidding process for Anadarko, but Occidental topped its bid to seal the deal.

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Warren Buffett’s backing

Occidental’s bid was also supported by Warren Buffett’s Berkshire Hathaway’s (BRK-B) $10 billion in financing. Berkshire will receive a dividend of 8%, which is above the 5.3% common shareholders in Occidental will receive. Berkshire will also receive an option to buy 80 million more shares of Occidental Petroleum, which is further dilutive to the existing shareholders of the company.

Stock reaction

After the Occidental-Anadarko deal was announced, Occidental stock opened 5.6% lower, and Anadarko stock opened 2.7% lower, which might imply that investors also don’t see the deal as value-accretive. Moreover, the market believes that Occidental overpaid for the deal.

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