Days before a fierce proxy fight between investor Carl Icahn and Transocean Ltd. comes to a head, the chairman and former chief executive of the offshore oil-and-gas driller said he would step down in the next year.
Michael Talbert, 66 years old, whose re-election has been opposed by Mr. Icahn, said in a press release late Sunday that if he wins re-election at this Friday's shareholder meeting in Zug, Switzerland, he will give up his chairmanship by November and step down from the board by this time next year.
"After consultations with our shareholders, I have decided to retire from the board on a timetable that will allow the board to carefully select a new chairman who will help guide the company in the creation of sustainable, superior value for all shareholders," Mr. Talbert said. He left the CEO post in 2002.
The move is meant to ensure that three new directors Mr. Icahn nominated for the board don't get elected, according to a person familiar with the matter, and mirrors steps taken by a number of other energy companies recently as activists have pressed them to focus on shareholder returns.
On Friday, Hess Corp.'s CEO, John Hess, said he would relinquish the chairman role in response to investor pressure.
A week earlier, Occidental Petroleum Corp. Executive Chairman Ray Irani was soundly denied re-election by shareholders and was replaced by an independent chairman. Chesapeake Energy Corp. last year replaced a majority of its board with directors recommended by major shareholders including Mr. Icahn; founder Aubrey McClendon stepped down as chairman last year and resigned as CEO in April.
In an open letter to shareholders Monday, Mr. Icahn said he stood by his recommendation that shareholders vote against Mr. Talbert and two other long-time board members.
"We find it to be utterly absurd that a Chairman facing the prospect of losing his directorship would be so brazen as to ask shareholders to return him as Chairman so that he and the board can then pick his successor," Mr. Icahn said.
The activist investor has been particularly critical of the company's $18 billion acquisition of rival GlobalSantaFe Corp. in 2007, a deal that he says was too expensive for the decades-old drilling rigs it got in the deal. He has also urged shareholders to approve a $4 per share dividend.
Steve Newman, the chief executive of Transocean, said the company wants to reinstate the dividend--which was eliminated last year--at $2.24 a share annually, down from $3.16 before the suspension. This will allow the company to keep enough cash to invest in its fleet of drillships and drilling platforms, manage the cyclicality of the oil-and-gas business and still leave room for even larger future payouts, Mr. Newman said.
"There's no question the company has underperformed," Mr. Newman said. "But Mr. Icahn's approach to closing that valuation gap would liquidate the company."
Investors favored the GlobalSantaFe acquisition in 2007, and it ultimately did give Transocean a greater global reach, said Angie Sedita, an analyst with UBS. But the deal wasn't followed by the kind of cost cutting and integration usually needed for such large transactions, she said.
More recently, Transocean has struggled because of the fallout of the Deepwater Horizon disaster in 2010. The company owned the drilling rig leased by BP PLC that exploded in the Gulf of Mexico, killing 11 workers and unleashing the worst offshore oil spill in U.S. history. Early this year, Transocean settled all civil and criminal claims with the Justice Department for $1.4 billion.
Mr. Newman said that settlement, as well as last year's move to sell less-profitable shallow-water drilling rigs and focus on more lucrative deep-water operations, are benefiting shareholders. First-quarter 2013 earnings were $321 million, up from $10 million last year but slightly below analysts' expectations because of higher operating costs.
The company's shares are up more than 22% so far this year, closing Friday at $54.64. But they are down from the peak reached in February, a month after Mr. Icahn first revealed his growing stake in Transocean and shortly before he revealed his demands for the larger dividend and to replace three board members, including Mr. Talbert.
The two largest investor advisory firms, Institutional Shareholder Services and Glass, Lewis & Co., both recommended that shareholders vote against Mr. Icahn's larger dividend.
But both largely agree with Mr. Icahn that the company has long underperformed its peers because of operational shortcomings. Both recommend replacing Mr. Talbert, the chairman.
Copyright (c) 2012 Dow Jones & Company, Inc.
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