Swiss drilling contractor Transocean Ltd. is defending its board and business strategy anew amid a corporate governance advocacy group’s support for two of the three director nominees being put forth at the company’s annual meeting by dissident shareholder Carl Icahn.
The company said Friday that it strongly disagrees with Institutional Shareholder Services’ assessment, and it accused Icahn of handpicking board nominees that are closely tied to him and lack relevant industry experience.
“Transocean does not believe that Icahn or his nominees have offered a plan or strategy for the company other than the extraction of an unsustainable dividend that the company believes would be detrimental to shareholder value,” it said in a statement.
Icahn is urging fellow shareholders to support his proposal to increase the company’s dividend to $4 a share and elect three new board members. Transocean has proposed a $2.24 dividend and re-election of its entire slate of board members.
ISS recommended in a report it issued Thursday that shareholders reject Icahn’s dividend proposal, saying that the sizable increase Icahn is pushing for could potentially stretch the cash availability for the company.
However, the group supports Icahn board nominees Jose Maria Alapont, former CEO of Federal-Mogul Corp., and Samuel Merksamer, managing director at Icahn Capital. ISS also recommended that Transocean shareholders reject incumbent nominees J. Michael Talbert and Robert Sprague. ISS did not get behind Icahn nominee John Lipinski, CEO and president of CVR Energy.
ISS suggested that change at the company is warranted in light of Transocean’s underperformance compared to its peers and the sharp drop in its stock price since the 2010 Gulf of Mexico rig explosion and oil spill. Eleven workers were killed when an undersea well owned by BP blew out and triggered an explosion on the Transocean-owned Deepwater Horizon and set off the worst offshore oil spill in U.S. history.
“The performance gap persists — a disappointing outcome in a company that underwent a transformational merger five years ago to become the largest player in the sector,” ISS said.
Transocean said it is confident its shareholders will exercise independent judgment regardless of ISS’ position.
“We urge them to decisively defeat Mr. Icahn’s nominees,” Transocean said. “We encourage shareholders to support our balanced approach to capital allocation in the interest of sustainable, long-term value creation and vote for the board’s highly qualified nominees.”
The company said Icahn’s nominees “reflect his apparent lack of industry knowledge and an ignorance of the attributes necessary to lead a world-class offshore drilling contractor.”
The rancor leading up to Transocean’s May 17 annual shareholder meeting has steadily increased since Icahn, a billionaire investor, disclosed earlier this year that he had acquired a sizable stake in the company and that he would aggressively push for change.