UPDATE 1-Icahn questions Transocean strategy in battle with board

Thu Mar 7, 2013 11:19am EST

HOUSTON, March 7 (Reuters) - Billionaire investor Carl Icahn piled more pressure on Transocean Ltd, saying the offshore driller's mergers were "ill-advised" and its development strategies "unsuccessful," and urged investors to vote for a dividend of $4 per share.

The activist investor has been campaigning for a higher payout for over a month, and is calling for major changes to the Switzerland-based company's board ahead of its annual meeting on May 17.

Transocean recommended on Sunday that shareholders approve a $2.24 per share dividend, and had earlier on Thursday defended its 13 "highly qualified directors" as it confirmed receipt of Icahn's proposals.

"Over the past several years ... the company has conducted ill-advised mergers, employed unsuccessful development strategies and squandered the substantial cash flow generated by the business," Icahn wrote in an open letter to Transocean shareholders on Thursday.

A spokesman for Transocean did not have an immediate comment on the letter.

Transocean grew out of a series of mergers that started with the purchase by Birmingham, Alabama-based Sonat Offshore Drilling of Norway's Transocean ASA in 1996. Three years later came the takeover of Sedco Forex, spun off by oil services giant Schlumberger, before a blockbuster deal with GlobalSantaFe in 2007 created an industry leader.

Icahn, who owns 5.61 percent of Transocean, wants the company to replace its directors, including the chairman. He requested shareholders to vote for his nominees, John Lipinski, José Maria Alapont and Samuel Merksamer.

Icahn is having a busy start to 2013. He also published a letter to Dell Inc on Thursday to oppose the computer maker's go-private deal and is seeking a $15.7 billion special dividend. Last week, Herbalife Ltd said it would add two Icahn-picked directors to its board.

Transocean responded to Icahn's dividend demand by saying said it was confident its proposed payout would maximize long-term value creation in what is a "cyclical and capital-intensive industry."

"The Board believes that, in the context of the uncertainties the company currently faces, a larger dividend would be overly aggressive and detrimental to the company's long-term performance," the company said in a statement.

Transocean shares were up 9 cents at $53.54 in morning trading.

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