[Editor's note: This story was updated at 2:45 p.m. CDT May 30.]
Occidental Petroleum Corp.'s activist investor Carl Icahn has filed a lawsuit against the company over what it called its "misguided" pact to buy Anadarko Petroleum Corp. and may seek a special meeting to remove and replace board members.
The lawsuit, filed on May 30 in Delaware by a group of Icahn companies, calls Occidental's recent agreement to purchase Anadarko for $38 billion "fundamentally misguided and hugely overpriced," and says "management wanted to avoid a vote at almost all costs."
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Icahn, who has built a $1.6 billion position in the company, believes "that the Occidental board and management are in far over their heads, have made numerous blunders in recent months and might continue to trip over their feet if the board is not strengthened," the lawsuit said.
Occidental said it would "respond in due course" to the lawsuit and looks forward to closing the merger, which will increase earnings. "Occidental is committed to maximizing long-term value for all shareholders, and our Board and management team continually evaluate opportunities to that end," the company said.
The company's bid for Anadarko topped one by Chevron Corp. and includes a pricey $10 billion financing deal with Warren Buffett's Berkshire Hathaway Inc.
The lawsuit seeks to review documents that detail the sale of preferred stock to Berkshire and information on an agreed sale of Anadarko's Africa assets to Total SA for $8.8 billion.
The deal would increase Occidental's debt to around $40 billion, assuming it sells the Africa assets to Total.
Icahn may seek to call a special meeting of shareholders to remove and replace directors, the suit said, and believes Occidental should have been a seller rather than a buyer in the current market.
"That would have been the stockholder-friendly thing to do," the suit said.
The Berkshire investment allowed Occidental to increase the cash portion of its bid for Anadarko, eliminating the need to win approval from its own shareholders.
The acquisition is "little more than an enormous bet on the price of oil," the lawsuit said, adding that "if management's dreams of glory require placing the stockholders' dividends at risk, the stockholders really ought to be asked whether they agree."
Icahn was not the only investor to take issue with the lack of a shareholder vote on the deal.
T. Rowe Price Group Inc. said it would vote against the Occidental board of directors at the company's annual meeting earlier this month because the company would not allow shareholders to vote on its bid for Anadarko, which T. Rowe Price and other shareholders opposed.
Occidental shares were trading down 0.38% at $51.80 in afternoon trading on May 30. The shares are down from $65.33 on April 12 when it was first rumored to be pursuing Anadarko.
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