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Will Icahn’s Lawsuit Bring Relief to Occidental Shareholders?

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Icahn says deal is a bet on oil prices

As reported by Reuters, Carl Icahn’s lawsuit against Occidental Petroleum (OXY) mentioned that OXY’s acquisition of Anadarko Petroleum (APC) is “little more than an enormous bet on the price of oil.” Icahn is also representing OXY shareholders’ concerns. Due to Berkshire’s financing, Occidental was able to top Chevron’s (CVX) offer for Anadarko without a need for its own shareholders’ approval.

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Shareholder vote

The lawsuit filed by Icahn stated, “if management’s dreams of glory require placing the stockholders’ dividends at risk, the stockholders really ought to be asked whether they agree.” After the acquisition, OXY’s debt would quadruple to $40 billion. This deal comes at a time when shareholders are demanding spending cuts and higher dividends from the company.

T. Rowe Price Group, another significant shareholder, was also opposed to Occidental’s bid for Anadarko without first consulting with shareholders. Icahn also believes that the deal is inappropriate given the current market environment. He made the case that oil prices (XLE) below $45 per barrel could force OXY to cut its dividend.

Growth for growth’s sake

Icahn may also seek a special shareholder meeting to potentially elect new directors to ensure that OXY is run in the interest of the shareholders rather than at the whims of the directors and officers who Icahn claims are interested in growth for growth’s sake. Occidental’s stock price has plummeted by 29.4% since April 12, the first time its interest in Anadarko was disclosed.

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