Governance in Brief
August 15, 2019 | Editor: Martin Wennerström
Occidental closes Anadarko acquisition, sparking investor pressure
On August 9, 2019, Occidental Petroleum (“Occidental”) completed the acquisition of rival oil and gas producer Anadarko Petroleum (“Anadarko”). The deal had been contingent on approval from Anadarko shareholders, who ended up overwhelmingly supporting the deal. The development marks the end of a month-long saga which saw one of the industry’s largest bidding wars in recent memory between Chevron and Occidental. Ultimately, the former pocketed a USD 1 billion breakup fee from Anadarko for having backed out of the agreed tie-up.
However, the successful takeover has escalated the shareholder pressure faced by Occidental, with activist investor Carl Icahn having now stepped up his efforts to overhaul the Houston-based oil producer. On August 13, 2019, Icahn submitted an open letter to Occidental shareholders calling for four directors to be removed and the company’s bylaws to be amended “to provide basic stockholder rights.” Notably, Anadarko’s August 9 meeting witnessed a shareholder rebuke as well, as 71% of the votes rejected a non-binding resolution on the merger-related compensation to be paid to its executives. The company had been under scrutiny for having altered the severance agreements entered with the CEO and other executives one day before Chevron announced it would acquire it.
Former Brixmor executives charged with accounting fraud
On August 1, 2019, US prosecutors charged the former CEO and CFO of REIT Brixmor Property Group Inc. (“Brixmor”) with allegedly participating in a scheme to manipulate a metric used to evaluate financial performance. Former CEO Michael Carroll and former CFO Michael Pappagallo allegedly “engaged in a years-long scheme to cook the books and deceive the investing public”, with the company’s former CAO and senior VP for Management Accounting having already pleaded guilty in July 2019 to charges brought in connection with their involvement in the scheme. The Securities and Exchange Commission announced on August 2, 2019 that it had also charged Brixmor and the four aforementioned executives with fraud, with the company agreeing to pay USD 7 million to settle the allegations and committing to engage an independent consultant to assess its “policies and procedures relating to certain non-GAAP performance measures.”
Casino operator Crown Resorts under mounting scrutiny
The Australian liquor and gaming regulator announced on August 9, 2019 that it had opened an investigation into Melco Resorts & Entertainment’s proposed acquisition of a 19.99% stake in rival casino operator Crown Resorts Limited from the latter’s founder and near-controlling shareholder, James Packer. Per a 2014 agreement entered with the Australian government, Crown Resorts is banned from conducting “any new business activities or transactions of a material nature” with Stanley Ho, the father of Melco Resorts & Entertainment CEO and Chairman Lawrence Ho. The development deals yet another blow to Crown Resorts, which faces increasing regulatory scrutiny over money laundering allegations and reported links to organized crime – surfaced by July 2019 media reports.
Opioid litigation sees potential turning point
Opioid makers McKesson, Cardinal Health and AmerisourceBergen have reportedly offered to pay USD 10 billion to settle claims that they helped fuel a health crisis in the US, with the National Association of Attorneys General – representing over 35 states in the settlement negotiations – having allegedly countered the offer by demanding that the distributors pay USD 45 billion. The three companies’ shares went down by approximately 6% on the reports, with other defendants in opioid litigation experiencing steeper stock price declines. The development has fueled speculation that opioid makers could be headed towards a national opioid settlement mirroring the massive 1998 USD 206 billion Master Tobacco Settlement.