Icahn has control of 61.6 million shares in the Calgary-based company through purchases of stock and options, according to a filing yesterday. Icahn, who paid about $277 million, may have conversations with management regarding “strategic alternatives, board seats, etc.,” he said in a post on Twitter.
“The question is what he brings to the table,” Sameer Uplenchwar, managing director at Global Hunter Securities in Calgary, said in a telephone interview. “It’s a buyer’s market right now. And historically investor activism hasn’t always worked well in Canada.”
The purchase by Icahn comes as Chief Executive Officer Hal Kvisle is targeting sales or joint ventures for Talisman’s assets in Asia, the North Sea and North America. The company “could” be split, and selling North Sea assets would be a first step in focusing on North America, Kvisle said in May.
Talisman fell 2 percent to C$12.89 at the close in Toronto. The shares have dropped 29 percent in the past three years amid slumping natural gas prices.
Icahn helped stir changes at Chesapeake Energy Corp. that included last year’s hiring of a new chairman, Archie Dunham, and the exit this year of Aubrey McClendon amid questions about the CEO’s management of the oil and natural gas producer.
At Transocean Ltd., Chairman Michael Talbert departed and the company reinstated its dividend, as well as planned cost cuts and more debt repayments, after it was announced earlier this year that Icahn had taken a stake in the world’s largest offshore rig contractor.
Kvisle, who succeeded John Manzoni as Talisman’s CEO a year ago, has pledged to make the company a “better performer.”
Talisman produces from five gas regions in North America, including the Montney and Duvernay formations, and operates internationally, with projects in the North Sea off the U.K. and Norway as well as in Indonesia.
Talisman sold a 49 percent stake in its U.K. unit to China Petrochemical Corp. for $1.5 billion last year. Sinopec has a veto over a possible successor to Talisman if the Canadian company sells its remaining interest, Uplenchwar said, adding that such a condition makes a sale of the assets more difficult.
Talisman also has holdings in Alberta’s Duvernay formation where companies are drilling gas that’s rich in petroleum liquids, which sells for higher prices. Exxon Mobil Corp., the world’s largest energy company by market value, agreed to buy Duvernay holder Celtic Exploration Ltd. in October, and Chinese state-owned PetroChina Co. acquired a 49.9 percent stake in Encana Corp.’s Duvernay acreage.
Icahn’s purchase may be a distraction for management, said Jennifer Stevenson, a vice president and portfolio manager with Dynamic Funds.
“The course they’ve already stated is to maximize value for shareholders,” said Stevenson, who helps manage C$100 billion and doesn’t own Talisman shares. “Now you have a shareholder that wants something, I’m guessing wants something more quickly. I think it could definitely speed up the process. But some processes just take time.”
Kvisle said last month that about a dozen possible buyers were looking at the company’s data rooms for its North Sea assets. The company is considering a joint venture in the Duvernay area and it wasn’t “practical” to join any of the proposed liquefied natural gas projects in British Columbia, Kvisle said at a Sept. 12 presentation in Toronto.
Talisman is expected to report a loss this year, the first since 1998 and down from net income of $3.3 billion in 2008, according to data compiled by Bloomberg. Talisman is targeting $3 billion in asset sales or joint ventures in the next year to reduce debt.
Canadian companies faced 42 cases of shareholder activism in 2012, almost double the number in 2011, according to Kingsdale Shareholder Services Inc. In February, Kingsdale CEO Wes Hall predicted there would be even more in 2013.
Activist hedge funds including Barry Rosenstein’s Jana Partners LLC and William Ackman’s Pershing Square Capital Management LP have pressed Canadian companies to change management or spin off parts of their businesses.
In April, fertilizer producer Agrium Inc. rebuffed Jana’s attempt to get the Calgary-based company to spin off its farm-supply retail stores. Last year, Canadian Pacific Railway Ltd. cut jobs, shuttered rail yards and ran longer trains to try to increase efficiency after Ackman succeeded in getting CEO Fred Green replaced with Hunter Harrison.
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