Transocean Investors Reject Icahn Dividend, 32 Year-Old Merksamer Voted to Board

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May 17, 2013

transocean(Bloomberg) — Transocean Ltd. shareholders voted in favor of one of billionaire investor Carl Icahn’s three board nominees, while rejecting his proposal for a $4-a-share annual dividend.

Icahn candidate Samuel Merksamer was voted onto the board of the world’s largest offshore oil rig contractor and shareholders removed Chairman Michael Talbert, Secretary Philippe Huber said at the Vernier, Switzerland-based company’s annual meeting today. Shareholders approved the company’s proposed $2.24-a-share dividend.

The company’s payment “represents one of the highest implied payout ratios and dividend yields in the industry,” Chief Executive Officer Steve Newman said on a May 9 earnings conference call. “We believe Mr. Icahn’s proposal is shortsighted, irresponsible and ignores the uncertainties the company currently faces.”

Icahn, the largest shareholder in Transocean with a 5.6 percent stake, began pushing for the dividend and potential board changes in January. In March, after Transocean proposed reinstating the dividend at $2.24 a share, Icahn announced his three board nominees for the company he said “has conducted ill-advised mergers, employed unsuccessful development strategies and squandered the substantial cash flow.”

Icahn’s interest in Transocean follows his takeover last year of oil refiner CVR Energy Inc., which announced a $5.50 special dividend in January. Icahn also pressured Chesapeake Energy Corp. for board changes and the natural gas producer replaced its chief executive officer last month.

Changing Boards

Icahn is one of several activist investors who have forced changes at energy companies in the past year. The Transocean vote comes one day after Hess Corp. reached a deal with Elliott Management Corp., agreeing to add three of the activist shareholder’s board nominees.

Occidental Petroleum Corp. Chairman Ray Irani, an executive at the oil company for almost three decades, was forced to step down this month after investors voted against him. SandRidge Energy Inc. agreed in March to make changes to its board after criticism from shareholder TPG-Axon Capital Management LP.

Transocean’s CEO will remain on the board along with fellow company-based nominees Robert Sprague, Frederico Curado and Thomas Cason.

Prior to the vote, Transocean said that Talbert would step down as chairman by a November board meeting. The former CEO pledged on May 13 to leave the board by the next annual shareholder gathering in 2014 after 19 years as a director.

‘Bear Responsibility’

“We believe that Michael Talbert, a long time incumbent, should bear responsibility for the long-term performance and outcome of strategic choices the company has made,” Institutional Shareholder Services said in an April 25 report.

The company said there weren’t enough shareholders present today to vote on an Icahn proposal to elect all board members every year, so the item was rejected.

Transocean halted dividend payments last year after its Deepwater Horizon exploded in the U.S. Gulf of Mexico. The company employed nine of the 11 workers who died in the April 2010 disaster that resulted in the biggest offshore oil spill in U.S. history. Transocean agreed to pay $1.4 billion to settle claims from the incident.

The company, which has 26 buy, 16 hold and two sell ratings from analysts, fell 0.6 percent to $54.40 at 12:32 p.m. in New York. The shares have gained 22 percent this year.

– David Wethe and Patrick Winters, Copyright 2013 Bloomberg.

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