I’m not necessarily a fan of corporate raider Carl Icahn’s tactics when it comes to investing. But in the case of Transocean (RIG) … well, I’m having a hard time finding something not to like.
To me, Icahn’s version of activist investing generally focuses too heavily on the short-term and not enough on the long-term picture. Take a look at the cash grab he’s doing at Apple (AAPL), for example. Distribute all $150 billion of the company’s funds via a buyback? That seems very shortsighted.
But every once in a while, Icahn does right by long term shareholders — as he’s doing at Transocean. After a yearlong proxy battle, RIG and Icahn have finally come to an agreement about the fate of the offshore specialist — specifically about the company’s cash hoard and the potential for lower costs and tax savings. Icahn and Transocean’s management have come up with a plan that will suit both long-term investors as well as those just looking for some quick gains.
Based on the new plan, RIG is looking like an even stronger buy.
The Holy Trinity for RIG Stock Holders
Since 2010’s Deepwater Horizon disaster — courtesy of BP (BP) — Transocean stock hasn’t been the best deepwater drilling equity on the planet. But the potential was there, and Icahn began to circle the embattled firm to draw out more value. That led to some nasty threats and proxy fights.
At first, it seemed like RIG was going to hold steady and go forth with its own plans — which weren’t that bad to begin with — but Icahn’s persistence has paid off in spades for shareholders.
According to the new plan, RIG will boost its dividend, cut costs and explore the possibility of spinning off assets into a tax-advantaged master limited partnership. That’s a move several rivals — such as SeaDrill (SDRL) — have been pursuing in spades. All in all, the proposed agreement with Icahn should be a huge benefit to anyone in Transocean stock.
How, you ask?