February 11, 2011 / 10:00 PM / in 7 years

UPDATE 2-Transocean to abandon 2010 dividend, plans another

* Transocean proposes new method of dividend distribution

* Needs approval at May 13 annual meeting in Switzerland

* Suncor CEO leaves board, Transocean chairman to retire

* Shares up 0.6 pct in after-hours trading (Adds details on board changes, background; updates shares)

By Braden Reddall

SAN FRANCISCO, Feb 11 (Reuters) - Transocean Ltd (RIG.N) RIGN.VX, the world’s largest rig contractor, has abandoned efforts to overcome a Swiss challenge against its 2010 $1 billion dividend payout, while setting out plans for another.

Transocean said on Friday it decided to stay last month’s appeal to the Swiss Federal Supreme Court over December’s lower court decision that blocked its payout to shareholders and it would now ask shareholders to vote on rescinding that payment.

But it said it would also ask shareholders to approve a $1 billion dividend out of additional paid-in capital in four payments, every three months starting in June of this year.

“The proposed dividend amount further assumes that no payment will be made under the 2010 distribution,” Transocean said in a statement, ahead of its annual meeting in May.

The company’s shares rose 0.6 percent to $77.70 in after-hours trading on the New York Stock Exchange.

The Zug, Switzerland-based company had planned to make its first regular distribution to investors in eight years in 2010, but the Zug Commercial Register, citing pending litigation related to the Gulf of Mexico spill, rejected that payout in August, which Zug’s Administrative Court then upheld.

    Transocean’s Deepwater Horizon rig drilled the well for BP Plc (BP.L) that blew out last April, killing 11 people and causing the worst offshore spill in U.S. history.

    The four distributions that had been planned to start in 2010 would have been through a reduction in the par value of Transocean stock, now 15 Swiss francs, allowing shareholders to avoid 35 percent Swiss withholding tax. [ID:nN16225049]

    Due to a 2011 change in Swiss tax law, dividends out of additional paid-in capital will not incur tax and also not need Commercial Register approval.

    Transocean also said on Friday that Suncor Energy Inc (SU.TO) Chief Executive Rick George had resigned as director of Transocean’s board with immediate effect, citing the demands of his job.

    Plus, Chairman Robert Rose and director Victor Grijalva, both older than 70, would not stand for re-election at the shareholder meeting in Switzerland on May 13 because they had reached the age limit for directors.

    Two new directors, former Chevron Corp (CVX.N) executive Jagjeet Bindra and a former Royal Dutch Shell Plc (RDSa.L) executive, Tan Ek Kia, will be voted on at the meeting. (Reporting by Braden Reddall; editing by Andre Grenon)

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