Shareholders in Occidental Petroleum voted to lower the threshold for calling a special meeting, making it easier for discontented investors to organise opposition to the board in the wake of anger over the company’s $55bn deal to buy Anadarko.
At Occidental’s annual meeting in Houston on Friday, a proposal cutting the percentage of shareholders required to call a special meeting was backed by investors speaking for 60 per cent of the shares voted, in defiance of opposition from Occidental’s board.
Fears that Occidental could be overpaying for Anadarko, which have been expressed by some shareholders, were also reflected in significant minorities voting against the appointment of the board’s nominated directors. The appointments were backed by investors representing between 70 and 82 per cent of the shares voted.
The meeting, held in a windowless conference room in the basement of Occidental’s headquarters building, drew a relatively small crowd of about 100. Despite some shareholders’ public statements opposing the Anadarko deal, when the company’s chairman asked if anyone in the room wanted to make a comment or ask a question, no one spoke.
The asset manager T Rowe Price, which owns about 3 per cent of Occidental, said earlier this week that it intended to vote against the board because of “significant concerns” about the Anadarko deal and anger at being denied a shareholder vote.
By restructuring the deal to increase the cash component, Occidental cut the number of new shares it must issue to a little less than 20 per cent of its total equity — meaning it no longer needed to submit the acquisition for shareholder approval.
Anadarko accepted Occidental’s cash and shares offer on Thursday evening, after Chevron declined to raise its rival offer above the $48bn the companies had agreed last month.
At the meeting, Occidental’s chief executive Vicki Hollub set out the case for the acquisition, saying she could see a path to increasing by $10bn the value of Anadarko’s assets just in the Permian Basin of west Texas. “That’s why we had the ability to offer $5bn more [than Chevron],” she said.
“We will make this work. We will get those synergies. And this is in the end going to be a great thing for our shareholders.”
The investor vote on calling special meetings is only advisory, but companies typically respond to shareholder views on this and similar governance issues.
The investor who proposed the rule change said in the proxy filing for the meeting that the move would give shareholders more power to replace directors, highlighting individual board members like Eugene Batchelder, who is retired “and did not serve on any other significant board to keep his skills current”.
The investor also complained about “a five-year drought” for Occidental’s share price, noting it had dropped from $91 to $72. Since then it has fallen further, to about $55 on Friday afternoon.
Occidental’s board had opposed the proposal, which calls for lowering the proportion of shares needed for supporters to convene a special meeting from 25 per cent to 15 per cent. The board argued that the 25 per cent threshold “strikes an appropriate balance” between shareholders’ rights and the risk that “a small minority of stockholders may trigger the administrative and financial burdens of holding a meeting to address a narrowly supported interest”.
About 40 per cent of the S&P 500 companies that are, like Occidental, incorporated in Delaware do not allow shareholders to call special meetings, and of those that do, 63 per cent have a threshold of 25 per cent or higher.
Get alerts on Mergers & Acquisitions when a new story is published