By Christopher M. Matthews and Cara Lombardo
Occidental Petroleum Corp. Chief Executive Vicki Hollub is eager to move forward following her $38 billion deal to buy Anadarko Petroleum Corp. But first she has to deal with Carl Icahn, who is trying to bring Ms. Hollub's predecessor back into the boardroom.
The activist investor has already pushed for four seats on Occidental's board, arguing that Ms. Hollub ignored investors and made costly rookie mistakes in her bid to outduel Chevron Corp. for Anadarko. Now, he has asked Stephen Chazen, who served as Occidental CEO until 2016, to consider being one of his board director nominees, according to people familiar with the matter.
Mr. Chazen didn't join Mr. Icahn's slate, but he has told Ms. Hollub he would join the company's board if it would help clear the impasse with Mr. Icahn, the people said. Ms. Hollub hasn't provided an answer either way, one person said.
Mr. Icahn, who holds about $1.7 billion in Occidental shares, or nearly 4.4%, has said Occidental botched the bidding process for the Anadarko deal and unfairly denied shareholders a say in the matter. Now that the deal looks likely to close next month, he isn't trying to block it but is instead fighting for influence over the 100-year-old company's direction.
Mr. Icahn and Ms. Hollub have spoken over the phone and once in person in an attempt to resolve their differences, some of the people said. But they continue to clash over the merits of the Anadarko deal and haven't discussed a settlement, the people said. Mr. Icahn has argued that Occidental was irresponsible for taking a pricey loan from Berkshire Hathaway Inc.'s Warren Buffett to finance the transaction, while Ms. Hollub has billed the deal as an opportunity for Occidental to use its heft to cut costs when developing Anadarko's reserves.
Mr. Chazen, who was an investment banker at Merrill Lynch before a long career at Occidental, is now chairman and chief executive of Magnolia Oil & Gas Corp., an independent producer. He is widely respected in the energy world and his board candidacy could emerge as part of a future settlement between the two sides, some of the people said. But one potential obstacle is that, at 72, Mr. Chazen could only serve less than three years before reaching Occidental's mandatory board retirement age of 75.
A settlement could become more likely if Mr. Icahn is able to garner enough investor support for a meeting to vote on his candidates, the people said. Mr. Icahn needs shareholders controlling at least 20% of Occidental's shares outstanding to sign off on such a meeting. Because the process to write the company to request a meeting can be arduous for shareholders, it is possible not all sympathetic shareholders will ultimately file in support.
Some investors, including T. Rowe Price Group Inc., have publicly voiced frustration with Occidental for circumventing a shareholder vote on the deal by increasing the cash portion of its bid.
On Thursday, influential shareholder advisory firm Institutional Shareholder Services Inc., which can sometimes sway large shareholders, urged stockholders to support Mr. Icahn's push for a vote.
"[T]here appears to be substantial shareholder frustration with the board that should be addressed in a more fulsome manner," the firm said in a note to investors.
In a statement, Occidental said it disagrees with the ISS recommendation.
Occidental topped Chevron in a bidding war for Anadarko in May, winning prized assets in the heart of the Permian Basin in West Texas and New Mexico, the country's most active drilling region. But Occidental took on significant debt to beat deeper-pocketed Chevron and must now swallow a company nearly its own size.
In an open letter Monday, Mr. Icahn said he believes the Anadarko deal was a rushed attempt by Occidental to avoid becoming an acquisition target itself. He has previously argued that Occidental should explore selling itself. He began buying into the stock on May 2, two days after Occidental's deal with Mr. Buffett was announced; at the time, Occidental's shares were sliding.
Mr. Chazen saw Ms. Hollub's aggressive pursuit of Anadarko as potentially risky, said two people familiar with his thinking. Mr. Chazen favored small "bolt-on" transactions during his tenure and tended to avoid big risks. But he also remains close to Ms. Hollub, offering advice periodically and he is unlikely to pursue a hostile board candidacy, those people said.
Mr. Chazen handpicked Ms. Hollub, an engineer by training who worked on oil rigs right out of college and landed at Occidental in 1982. Mr. Icahn has criticized Ms. Hollub for her lack of experience with mergers and acquisitions.
A number of large Occidental shareholders voted against board members at the company's annual meeting in May after Anadarko accepted its offer. Ms. Hollub received about 78% of shareholder votes. The lowest total received by any director was about 71% of the vote. When voting falls below 80% support, it is usually a sign of shareholder dissatisfaction, corporate governance experts say.
Write to Christopher M. Matthews at [email protected] and Cara Lombardo at [email protected]