NEW YORK (AP) — Transocean Ltd. shares rose Monday on news that billionaire investor Carl Icahn boosted his stake in the oil drilling company and said he plans to push for it to declare a dividend of at least $4 a share.
THE SPARK: In a Friday Securities and Exchange Commission filing, Icahn said that he and his affiliates now own 20.2 million of the company's shares representing an about 5.6 percent stake.
In addition, Icahn said that he thinks the shares are undervalued at their current levels and believes that the company should return value to shareholders in the form of a dividend of at least $4. If the company's board doesn't declare the dividend, Icahn said he plans to propose it at the company's annual shareholder meeting.
THE BIG PICTURE: Transocean owned the Deepwater Horizon drilling rig that exploded and sank in the Gulf of Mexico in 2010, triggering the nation's worst offshore oil spill. The company recently reached a plea agreement with the Justice Department over its role in the disaster.
Icahn is known for buying stakes in struggling companies and then shaking them up, with mixed results. The news comes after Transocean said earlier this month that Icahn had bought a 1.56 percent stake and might want to buy more if he can get regulatory approval.
Before Icahn's latest purchase of shares, the company's largest stockholder was Capital Research & Management, with a 5.1 percent stake, according to FactSet.
In Friday's filing, Icahn said he also wants to have additional talks with Transocean about its business and strategies, along with the possible addition of his nominees to its board.
THE ANALYSIS: Bernstein Research analyst Scott Gruber, who backed his "outperform" rating for Transocean, said that while the company has enough cash to fund a $4 dividend, doing so would reduce its funds available to pay off debt.
But he noted that the company's current amount of debt and interest coverage "appear reasonable" and that the cash set aside for potential additional oil spill liabilities would "remain adequate."
THE SHARES: Up $1.52, or 2.7 percent, to $58.28 in afternoon trading, after peaking at $58.62 earlier in the session and coming close to a 52-week high of $59.03 set in March.
Since the beginning of this year, Transocean shares have risen more than 30 percent.