Activist investor Carl Icahn has a vested interest in the success of Occidental Petroleum (NYSE:OXY). In fact, as of Thursday, he has four times the interest he used to have, after upping his stake in the company to 10%.
But Occidental Petroleum wishes it were otherwise.
In a move calculated to fend off criticism from Icahn, who alleges that the company's $37 billion acquisition of Anadarko Petroleum in 2019 has "destroyed over $30 billion in stockholder value," on Friday Occidental adopted a "limited duration stockholder rights plan."
In the corporate law world, though, such plans go by another name: "Poison pill."
Under Occidental's plan, for each share of the energy company's stock that a shareholder holds at the close of business on March 23, he or she will be awarded a "dividend" of one "right" to spend $55 (thus exercising the right) and be issued by Occidental $110 worth of new Occidental shares.
The rights in question will become exercisable if and when any "person or group" (whether or not named "Icahn") acquires a 15%, or in some instances 20%, stake in the company "in a transaction not approved by Occidental's Board of Directors." At that time, assuming most shareholders exercise their rights, Occidental's share count would explode in size, diluting the stake of all shareholders and making it more difficult and expensive for the person who triggered the whole scheme to proceed to gain a controlling interest in the company.
Occidental will ask its shareholders to approve its plan at the upcoming 2020 annual meeting. If approved, the plan will continue in force for one year -- but the board can buy the rights back at any time for $0.0001 per right. If disapproved, the plan will not be implemented.