The board of directors of Transocean LTD (NYSE:RIG) approved the reinstatement of dividend payments to the shareholders after pressures from activist investor Carl Icahn, who a owns 5.61 percent stake in the company.

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Based on its latest 13D filing with the SEC, Icahn believed that the shares of Transocean were undervalued and demanded the company to distribute $4 per share dividend to shareholders. The activist investors also indicated his intention to seek the appointment of new board members in the company.

As a result, the board of directors of the company recommended the payment of $2.24 annual dividend or a total of $800 million subject to the approval of shareholders. Last year, Transocean stopped its dividend payout to defend its investment-grade credit rating and to maintain a strong and flexible balance sheet, according to the report from Bloomberg.

In a statement, the company said that the level of the proposed dividend supports its key objectives and to facilitate continued progress towards achieving its gross debt target of $7 billion to $9 billion. Transocean LTD (NYSE:RIG) aims to accelerate the repayment of its debt and its objective is finish the payment of approximately $1 billion debt above its existing repayment obligations by the end of 2012.

The company further stated that the proposed dividend “establishes a basis for future increases” depending on the condition of its business.

Transocean also cited that its decisions regarding the dividend payout was based on multiple factors including the uncertainties related to the Macondo well incident, the Fairtrade field incident in Brazil, and the ongoing tax litigation in Norway. The company said its board will continue to evaluate its business and will consider the distribution of cash to shareholders on a regular basis in accordance with applicable laws.

Transocean LTD (NYSE:RIG) is the owner and operator of the Deepwater Horizon rig that exploded in the Gulf of Mexico in 2010. The company is one of the companies sued by the DOJ in connection with the explosion and oil spill.

The company also announced the appointment of Fredirico Curado as Class II director for a term of three years. Curado was a former president and Chief executive officer of Embraer SA (ADR) (NYSE:ERJ).  Thomas Cason was also re-elected as Class II director for another three years.

The stock value of Transocean is down by almost 1 percent to $51.94 per share, as of this writing.