Occidental Petroleum has deployed a “poison pill” to prevent a hostile takeover, a day after hedge fund investor Carl Icahn almost quadrupled his stake in the US oil producer and called for its chief executive to be fired.
The move escalates the battle between Occidental’s board and the octogenarian activist Mr Icahn, who was opposed to the company’s $55bn takeover of US shale oil producer Anadarko Petroleum last year.
Occidental’s shares, which traded below $13 on Friday, have plunged from almost $70 before it bested larger rival Chevron in a bidding war for Anadarko. Investors have fretted about the debt it took on to complete the takeover.
On Tuesday, Occidental slashed its dividend by almost 90 per cent as crude prices tumbled in response to a flood of extra supply from Saudi Arabia, which is engaged in a price war with Russia.
Mr Icahn took advantage of a new leg down in Occidental shares in the wake of the Saudi-Russian split to boost his stake to 9.9 per cent.
“The company is terribly run. They had to cut the dividend. The oil price is again the match that ignited it,” Mr Icahn told CNBC on Friday. “In another culture, the board, the people on the board, would have the dignity to resign.”
A poison pill allows a company to issue new shares to dilute any unwanted suitor and prevent them building a major stake. Occidental’s board said on Friday it would give its shareholders the right to receive one new share for each existing share, with the process to begin if any individual investor ends up controlling 15 per cent or more of the company.
After disclosing the poison pill, Occidental shares were up 6 per cent in mid-morning trading in New York, outpacing a broader rally in US stocks.
In Friday’s CNBC interview, Mr Icahn called the poison pill move “a study of what shouldn’t be done in corporate America” and a “travesty of corporate governance.”
Mr Icahn revealed that he had increased his stake on Thursday. In a filing, he predicted takeover bids for the company and said the board and chief executive Vicki Hollub needed to be replaced to ensure those offers would be properly considered.
“At that time, we will need a board that will encourage, not discourage, potential bids, and who will allow shareholders to decide whether or not to accept them,” the filing said.
Mr Icahn’s filing said he was considering all options for his stake, hinting that he could partner with another company to take over Occidental.
Additional reporting by Eric Platt in New York