OKC-based Kerr-McGee, Icahn end proxy battle

Journal Record, The (Oklahoma City), Apr 15, 2005 by Jerry Shottenkirk

Kerr-McGee's proxy battle is over. The company said Thursday it will drop its complaint against financier Carl Icahn and partners, pending completion of a share repurchase program.

Kerr-McGee filed a lawsuit on March 10 in U.S. District Court for the Western District of Oklahoma. Company officials said they received word that Icahn and Jana Partners will withdraw their nominations to the board of directors. Kerr-McGee said in its lawsuit that Icahn and partners violated federal antitrust laws. The Icahn group, which owns 7.6 percent of Kerr-McGee's shares, said it will no longer seek seats on the board.

The company announced plans to repurchase $4 billion of its common stock at between $85 and $92 per share. The purchase will be part of a Dutch Auction offer and is part of the settlement. Officials said they expect the repurchase program to be completed by mid-May. It will be the largest buyback of common stock in Kerr- McGee history.

Our board and management team put together a plan that would capitalize on high commodity prices, enhance our exploration and production assets and immediately return value to our stockholders, said Luke R. Corbett, chairman and CEO of Kerr-McGee. Strategically, this will make Kerr-McGee a strong company, while increasing stockholder value.

Corbett said that with the pending separation of Kerr-McGee's chemicals unit and the sales of higher production decline oil and gas properties, Kerr-McGee will be better positioned to deliver consistent competitive performance as a pure-play exploration and production company. With the proceeds from the separation of the chemical business, divestitures of selected oil and gas assets, and cash flow, which has been underpinned by an expanded hedging program for 2005 through 2007, we expect to be able to reduce debt in the range of about $3.5 billion to $4.5 billion during the next two years.

Kerr-McGee estimated the potential divestiture of oil and gas properties to be between $2 billion and $2.5 billion. It will include properties in the Gulf of Mexico, North Sea and various sites in the United States.

Kerr-McGee has repurchased $250 million of an original $1 billion stock buyback program it unveiled last month.

Corbett said he was appreciative of the support Kerr-McGee received from Oklahomans.

We have received hundreds of letters, cards and phone calls of support from people throughout the community during the past few weeks, Corbett said. This outstanding show of support from our peers, friends and neighbors, is greatly appreciated by our management team and our employees.

Local leaders had positive reactions to the news of a settlement.

Kerr-McGee is a good corporate citizen and it's great for Oklahoma City that the differences have been resolved, said John Hermes, executive director of McAfee and Taft. This is beneficial to the shareholders. It's great news for all of those who want to continue to make an investment in Kerr-McGee.

The State Chamber was one of Kerr-McGee's top supporters and last month had asked all chamber members to send letters of support to state legislators and Kerr-McGee officials.

Kerr-McGee is synonymous with Oklahoma, and this obviously is great news, said Ronn Cupp, senior vice-president of government affairs for The State Chamber. It was mostly the fear of the unknown. A corporate raider's main objective is to get control, and they rarely ever put down roots and grow a company. They make their money and get out. It's great that it was resolved. Kerr-McGee was created here and is one of only four or five Fortune 500 companies we have in the state.

Kerr-McGee on Wednesday entered into a commitment letter with J.P. Morgan Securities, JPMorgan Chase Bank, Lehman Brothers and Lehman Commercial Paper to fund the stock repurchase and reduce debt.

JPMorgan and Lehman each committed to provide Kerr-McGee with four loan facilities totaling $6 billion. The loan facilities consist of a six-year and two-year senior secured facility of $2 billion each, a five-year, $1 billion secured revolving loan facility and a $1 billion unsecured interim loan facility.