Breakingviews: Oxy victory would help Icahn’s poor oil-patch rep

Carl Icahn isn’t exactly known for his tact. When he attacked Occidental Petroleum in February, he told its investors that “you don’t have to be Sherlock Holmes” to think that Chief Executive Vicki Hollub bought rival Anadarko Petroleum at high price so her company wouldn’t itself become a target. Icahn was at least proven right about Hollub’s overreaching – her deal has done her and her company in after she slashed its dividend on Tuesday. Having increased his stake to 10%, the activist may get his way. He could use the win.

Icahn is no stranger to the oil patch, but he hasn’t always come away victorious. One of his better deals has been with refiner CVR Energy. In early 2012 he revealed he owned more than 14% of the company. Having criticized its board, Icahn made an offer for all the shares, and more than half of shareholders accepted. Icahn now owns more than 70%. The company has returned roughly 8% annually since he first invested, according to Refinitiv, better than smaller refineries like HollyFrontier but worse than large competitors like Valero Energy and the S&P 500 Index.

Then there is SandRidge Energy. In late 2017, Icahn started to attack then-CEO James Bennett, who had taken over after his predecessor left with a severance package of more than $90 million. Bennett then steered the company into bankruptcy. Icahn has a keen eye for weak leadership. But as he remained in the stock, the company turned down an offer from Midstates Petroleum, and SandRidge has since lost some 90% of its value.

Other campaigns have ended with value similarly being eroded. Chesapeake Energy’s stock dropped more than 50% between May 2012, when Icahn revealed a stake in the company and campaigned to replace at least four directors, and when he retreated in September 2016.

In other words, Icahn may often be right, but that doesn’t mean investors who follow him do well. That’s a potential problem, because his campaigns to vote out boards like Oxy’s need other investors to back him. This time his enlarged stake, and Hollub’s tattered credibility, mean Oxy’s board would be smart to offer him a truce, and put itself on the auction block. That would give Icahn something to take along to his next battle.

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