Carl Icahn: Anadarko – Occidental Petroleum (OXY) Deal Is Too Risky

CNBC Exclusive: CNBC Transcript: Icahn Enterprises Chairman Carl Icahn Speaks with CNBC’s Scott Wapner on CNBC’s “Fast Money Halftime Report” Today

OXY

WHEN: Today, Thursday, August 8, 2019

WHERE: CNBC’s “Fast Money Halftime Report

The following is the unofficial transcript of a CNBC EXCLUSIVE interview with Icahn Enterprises Chairman Carl Icahn and CNBC’s Scott Wapner on CNBC’s “Fast Money Halftime Report” (M-F 12PM – 1PM) today, Thursday, August 8th. The following is a link to video of the interview on CNBC.com:

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SCOTT WAPNER: Alright. We’re back. Anadarko Petroleum Corporation (NYSE:APC) shareholders voting today to approve the company’s $38 billion acquisition by Occidental Petroleum Corporation (NYSE:OXY), a deal that has angered our next guest. Carl Icahn owns more than a billion and a half dollars’ worth of Occidental stock. He says the deal is too risky and expensive. Mr. Icahn joins us on the phone in a CNBC exclusive interview. Carl, welcome back to Halftime. It’s been awhile. It’s good to talk to you again.

CARL ICAHN: Yeah. It’s good to talk to you, Scott.

SCOTT WAPNER: So I have, Carl, the press release in front of me, which literally dropped within the hour before our program. Occidental completes the acquisition of Anadarko. It seems like the ship has sailed on this and you knew it was a long shot, I take it. What do you do now?

CARL ICAHN: Well, Scott, we’ve – we certainly are going to -- you can’t fight this deal and we said that right at the start. But I think this deal is one of the worst I’ve ever seen, and I have seen a lot of stuff that has gone on over the many years that we have been involved. You take a look at Oxy and you take a look at Vicki Hollub, who says that she has done a great job, and is interested in the long-term benefits to the company. Since she came into as CEO May 2nd, 2016, the value of Occidental has dropped $23.7 billion, down 41%, under her stewardship. While the XLE, which is, you know, a comp to them, a comp to Oxy, you know, the big oil companies, have only dropped 14%. And more interestingly, since she announced this deal, or not that she announced it, I think David Faber broke it, I believe, around April 11th, the stock has gone down 16 billion. Now, what does that tell you? And the company had promised – they promised to shareholders they would maintain a proven balance sheet and not take undue risks. Now, what the heck do you call this? And even worse, not only did they break that promise, or break that commitment, but they wiggle out of having to have the shareholders vote their vote because normally you would need 20% of a shareholder vote to be able to do a transformational transaction like this. So, they blatantly ignored – and this has been the history of Occidental – they blatantly ignored shareholders. Shareholders are a nuisance to them. And it’s time we hold them accountable. I mean, if the board had done this or in a family-owned company, they not only would be fired, but they would be sued. And so, it’s time that you make them accountable. Now, look, if they go in and say, ‘Hey, look, we have this deal that we must do, you know, and Icahn is going to be disruptive.’ Now, I have never been disruptive in companies where companies do a good job. I mean, it doesn’t serve my purposes to be disruptive. I believe in not micromanaging. But there are two things you have to do in this company. You have to make sure that we have representation to keep from doing another blatantly stupid act like this.

SCOTT WAPNER: Let me ask you, because there is a lot in that answer, Carl. You know, you mentioned the performance versus the XLE. You know, there are those who say a better representation of how the stock has performed looking at it versus the XOP, and you know what oil has been doing recently.

CARL ICAHN: Yeah, but –

SCOTT WAPNER: It’s been a mess. The stocks have been a mess. And if you look over the more recent history, it hasn’t performed as badly as, say, the broader market has, in some cases over whatever time period you may be looking at, it’s performed a little bit better. It’s been a tough environment.

CARL ICAHN: Well, hold on. Hold on, Scott. I would just like to disagree with you, respectfully, with what you just said. This company promised to show they were going to be prudent. They are a large, large company. Their comps are Chevron, Exxon, Shell. Those are the comps to this company. Those are the comps they want to be believed they are comparable to. And if you look at those comps, those comps have not done badly. And by the way, Oxy might not have done badly if she didn’t make one mistake after another. And under Chazen, the CEO before her, they were doing pretty good. I mean, she took a company that was way up and she, I think, has helped to destroy it. Now, I am not going to argue about her competence as an engineer. And, therefore, I’m not going to in any way try to micromanage this company, nor do I micromanage most of the companies we have been involved with. And I think our model has worked. I mean, I don’t have to really defend my model. I mean, if you look at the hundreds of companies we have been in, shareholders have benefitted by over a trillion dollars, by I think partially by us being involved. So, I’m not going to apologize for that. You tell me why they refuse to put us on the board. If we’re on the board, we are going to see that something like this does not occur again without a board vote, a shareholder vote.

SCOTT WAPNER: Right. Well, the reason they say –

CARL ICAHN: Let me just finish. Let me just finish, because this is important.

SCOTT WAPNER: Okay.

CARL ICAHN: Also, we believe that the reason they did this was to keep the shoulders from knowing that there was another suitor around. That’s what I believe. And if there is another suitor around, I want the shareholders to see an offer made by that suitor rather than hide it under the rug, which I’m sure this board will do. This board has not acted in the best interest of shareholders. That’s as simple as that.

SCOTT WAPNER: So, they – so, you asked why won’t they put your folks on the board. They say that they are not qualified. That’s number one. And the reason why you didn’t get the shareholder vote was, and what really sticks in your crawl about this whole thing, is the Buffett deal that the company made with him, $10 billion, and they gave him warrants in response of that, and you have criticized that heavily.

CARL ICAHN: Well, wait a minute. That’s absurd. They didn’t have to give -- I mean, Warren did a great job for himself at Berkshire. I respect that. But they didn’t have to give him a billion and a half dollar gift. They just went out to raise $15 billion yesterday, the day before. 15 billion was oversubscribed. But, it was 75 billion. So, they could have easily got that money anyway. They just -- she just rushed out in a panic. She admits she has no experience in M&A, so what the hell is she doing running an M&A --

SCOTT WAPNER: Maybe she would say she is an operator. She focuses on the operation, not the – she’s not a banker.

CARL ICAHN: Okay, but she ran to Omaha to make this deal with Buffett. 90 minutes, Buffett did the deal. Usually Buffett goes with Charlie -- to Charlie Munger before he makes a deal. He didn’t even bother on this one. He just did the deal in 90 minutes. So, you know, the whole thing is a travesty.

SCOTT WAPNER: You intimated in a -- either an interview or a letter that you knew of somebody who would give the financing without the warrants. Who was that?

CARL ICAHN: Well, I’m not going to divulge that. But I definitely knew somebody. Okay. No, I will divulge it. I would have done it. So, simple as that.

SCOTT WAPNER: Okay. That makes it more convenient -- did you make any kind of offer?

CARL ICAHN: I didn’t know about it. It was a secret. At least to me. She is not going to call me anyway, obviously. I don’t think I’m on her favorite list. I’m not going there for Christmas dinner to Galveston. But, you know, I would say that she definitely could have gone out. Look, I have to tell you something, Scott. In all of the deals I have done, and this is really truthful, and I’m not – I’m saying this 100%: in every deal I have done, I have always found in talking to people, yeah, all my project solicitors would tell me they’re talking to people, ‘Oh, they disagree with you, Carl. They say this company isn’t doing bad. You know, the chairman is good, the CEO is good. They just think you’re wrong.’ I have never spoken to this one—talked to anybody that’s not enraged by what they have done. Okay. Everybody agrees with what we said, that this was blatant abrogation of fiduciary duty. And I hope we are going find out more when we get that 320-request agreed to.

SCOTT WAPNER: Let me ask you this: about the Buffett thing, which we discussed, here’s what I want to understand, okay? The Buffett deal was announced on April 30th. I looked at your filing and I have it right in front of me I’m holding it up. You starred -- started to buy the stock May 2nd. So, the Buffett news had gone public on April 30th. So, you knew about Buffett being in, and then you started buying the stock. If you were so against what the company did with Buffett, why did you start buying the stock once that news had been made public?

CARL ICAHN: Hey, Scott, you of all people know my modus operandi. I buy things when they go down. The stock -- take a look at -- I bought the stock whether it went down. Obviously, it went down more. So, we are losing money on it at this point. But that has happened to me many times. We buy – you just look at our history. We just bought Caesar's. It was down, what, 40% when I bought it. So why did I buy Caesars if I didn’t like the way it was being managed?

SCOTT WAPNER: Well, I’m wondering if you saw—

CARL ICAHN: But, by the way, Caesar’s -- Caesar’s has -- I -- I applaud the board for doing the right thing as far as working the deal with El Dorado. I think they acted very responsibly. Jim Hunt did a great job as Chairman in listening to what we were saying. Not only listening, but deciding. Weighing the differences. Here, you really just can’t even talk to these people. And everyone sort of says -- which is funny, everyone agrees with what we’re saying. But when you ask why I bought the stock, that’s a surprising question for you?

SCOTT WAPNER: Well, I just—

CARL ICAHN: The -- stock went down, so I bought it. Because I really -- I honestly believed that -- I really believed that something might go over that deal because it was so ridiculous, a deal for a company like Occidental to take on and spend the extra billions and billions it had to pay to do it. In fact, if they really had any desire to do this deal, what did they have an epiphany on April 12th? Why didn’t they go in two, three, four months before? Now, they will say Walker over at Anadarko didn’t want anything to do with it, and therefore, he didn’t want her in the stock, he wouldn’t take her stock. That’s their reasoning, that they wouldn’t talk to him.

SCOTT WAPNER: Part two of my question, and you’ll understand I think better as to why I asked it the way I did, is that whether you thought that, you know, look, the market made its initial judgment on the Buffett part of the deal. The stock went down. You are not the only person who criticized that, including our own Jim Cramer. So, I get it. Part two of my question though, which I hope sheds light on the reason why I even bring it up, is I am wondering whether you thought Chevron would come back at a higher bid or somebody else would come in at that moment and try and top Occidental?

CARL ICAHN: Well, that certainly occurred to me. Or did I think that possibly, you know, that the deal that the board would act more responsibly in a keeping Vicki and the Chairman from doing this. and I blame Batchelder, who has a lot of power on that board, I understand, for allowing this to happen. A board is supposed to keep a runaway CEO intact and what we have here is a runaway board and a runaway CEO. Now, being that said, I am not going to go micromanage. We put up people on the board. All we care about -- we are not going to tell them how to do this damn Anadarko merger. That’s done. And they know how to do it better than any of us could think about doing it as far as putting it together. And that’s why we make trillions of dollars for shareholders, at least a trillion for shareholders over the years. We don’t go in and presume to know what we don’t know. So, we’re not going to get in any way involved in being distractive. But we want to be sure of two things. One, they don’t do another stupid deal without our say and without the shareholders getting to see it. And two, if somebody wants to buy the company, it doesn’t get brushed under the rug because all these board members -- because I believe these board members just like their jobs. I mean, I will just say it bluntly. Hey, maybe you can’t blame them. You’ve got a bunch of board members here, you know. I don’t think any of them, or very few of them have oil experience. And you just have them there. And what the heck, they have got a cushion job. And so does she, if I’m being honest. She makes 240,000 a week or some crazy number like that. So, you know, she makes in one week what the median shareholder in Occidental makes in two years. I mean, the whole system is crazy. That’s why you have a wealth gap. You know, I wouldn’t mind not getting paid if the shareholders made a lot of money.

SCOTT WAPNER: Let me ask you this. Let me ask you this. Your track record, obviously, and your results speak for themselves. Let’s wrap up this part of the conversation with my last question is: you want four board seats, would you think that you could come to any kind of an agreement with the company? Would you take one board seat? Do you think you can get one?

CARL ICAHN: Come on, Scott. You know me better than that. I am not going to negotiate on CNBC on that stuff. Come on.

SCOTT WAPNER: Don’t fault me for asking you, Carl.

CARL ICAHN: You want to be an investment banker, come down to Wall Street and be an investment banker. I mean, we are not going to negotiate on CNBC.

SCOTT WAPNER: Don’t fault me for trying.

CARL ICAHN: Okay. I can’t fault you for trying. You always try, and I admire you for it.

SCOTT WAPNER: Well, I appreciate that. Let me ask you more broadly, what do you make of the market? Oil has been getting, as I said, destroyed. So many stocks getting hammered, too. What do you make of that? And then we can get into the broader market. Because you have other oil exposure. You have played in those stocks over the years. What do you think of it?

CARL ICAHN: Well, you know, you get cycles. And, you know, things look terrible and the storm is there and the hurricane and the wind is blowing and then, things could turn around. And so—but, I’m not telling you I’m bullish on the market at all. I think that we do have a lot of problems in this market. I mean, you really have a situation where the markets -- for reasons that relate to value. Meaning you get low interest rates. People have nowhere to put their money. Money flows into index funds, whatever. And it just keeps going until it stops going. So, I’m not going to tell you that I’m bullish. But you know, these things have cycles. The energy companies, I mean, the people aren’t going to stop using oil. I mean, if you get a recession, maybe there will be less use, but then again you have got the problem with Iran, you got the problem with Venezuela, you have some discipline with Saudi Arabia and OPEC. I mean, I personally won’t say that. But it’s sort of interesting, now that you mention oil pricing going down, how does this board and Vicki have the temerity to risk the company, literally risk the dividends for certain, and even end up like this when they don’t have a balance sheet to back it up. If chevron could do it, you know, and Exxon could do it. But it’s really blatantly ridiculous to be doing the deal that she did here. And to say that there shouldn’t have accountability is really an absurdity. I mean, in the army if she did something like this, she would be court-martialed.

SCOTT WAPNER: The -- what do you think of the job the Fed’s done?

CARL ICAHN: Hey, look, you know, I think the Fed’s got a lot of different pressures on it. I honestly think –

SCOTT WAPNER: --Including ones from the President?

CARL ICAHN: Yeah. And, look, I’m not going to get into politics or anything like that. But I think that lowering the rates is just like, you know, just, you know, if you have a bad headache and you take the aspirin. The headache doesn’t go away maybe. Or maybe you have something worse and you take it. In other words, I don’t think lowering rates is the answer -- the end-all answer. Because if it was that easy-- if it was that easy, you would never have these cycles. And you have it in a capitalistic system, you have these cycles. I do think that there is risk in what’s going on. And certainly, with China, and certainly here and there. I think you really have to settle the China problem. You have to really see -- because the China problem is not going to just have repercussions for us. It has repercussions throughout the world. And I am not going to get into the politics of it. And I certainly understand the reasons behind doing it. But on the other hand, there are strong reasons to settle it.

SCOTT WAPNER: But are you saying -- are you saying you disagree with the President and Larry Kudlow and Peter Navarro who suggest that the Fed needs to continue cutting rates?

CARL ICAHN: Look, I am not going to get into politics. I would say that they have -- that there is an argument for cutting rates. But you look at Europe. I mean, they cut the rates to a negative, and look at the economy over there. So, I don’t think that’s the final answer to the problem.

SCOTT WAPNER: How do you think the trade war is going to play out?

CARL ICAHN: Look, I hope it’s settled. And I think -- put it this way, I have every hope that they will make a deal and get that settled sooner than later. And I think -- I certainly think -- well, I don’t get into politics at all. And I have enough to do so I don’t get to Washington. But I think Donald would certainly, you know, like to see it settled and I have hope that it will be. And I think it’s very important to settle it one way or another. Look, China has reasons to settle it, too. It’s not just a one-way street here. So, I just think what two great powers want to get something done, they will figure out a way to do it. But I’m not the expert on that. Ask me about the market. By the way, ask me about the market, and it’s one period for me where usually you have an opinion and you figure it out and you have a strong opinion. I have no opinion now on this market because there are so many variables. It’s so strange right now that – so, ask me about some of the stocks I do have an opinion on.

SCOTT WAPNER: I’m going to do that. You’re not the only one who has told me that recently as well, you know. Other big-time investors who are sort of are throwing up their hands trying to figure out what’s going on. It hasn’t been the easiest environment. So, you said it, so I’m going to do it. What are your intentions in Cloudera? You have a big stake there.

CARL ICAHN: Well, I think it’s a very undervalued company, obviously. Or I wouldn’t be buying it. I think going to 1 1/2 times revenue for a company like that, I think it’s very attractive. And here’s another one when you ask me ‘Well, why did you buy it if you think the company is sort of, shall we say, not done the best job on this merger they just did? And they have to obviously they have an interim CEO now.’ So that’s the perfect one I bought. And I think, even with Oxy, if you could put a muzzle on management and the board and make it more realistic, I think Oxy is undervalued. But if they keep going this way, we’re going to have a problem there.

SCOTT WAPNER: Well, are you – have you spoken with the management of Cloudera yet? Do you want board seats there?

CARL ICAHN: Well, we spoke very briefly, and I certainly never asked for anything. We just talked. I just called them up to say I was filing a 13D.

SCOTT WAPNER: How did that go over?

CARL ICAHN: Well, no, it wasn’t bad. I mean, you know, we spoke for a few minutes and said we would speak again. You know. Sounds good. The normal thing. And I think that Cloudera is undervalued. But, obviously, I think that. So—

SCOTT WAPNER: Are you buying any other stocks?

CARL ICAHN: Well, yeah, there are a few, but I don’t really want to talk about them at this time. You know, I like the -- I’d like to keep it in the -- be an activist. So, it certainly is an interesting time. I think there’s certainly some very interesting opportunities. But, you have to worry about a full-scale recession. So, you have both of these things weighing on you. And it’s one time that -- unusual for me that I don’t have a real feeling either way on the market. But it’s hard to keep hedge. You know, you have the hedge, you lose on hedge, you lose on the other side. You really – so I just like the model I do where you’re an activist. And, usually, as you’ve seen in the past, they work out. Not always. Not always.

SCOTT WAPNER: No. But more so than not, or we wouldn’t be having this conversation, I suppose, right, Carl?

CARL ICAHN: Yeah. Right. You wouldn’t be interested in talking to me and I wouldn’t have the money to buy Oxy. Right?

SCOTT WAPNER: There you go. I’m going to let you run. It’s been great catching up with you again. I appreciate your time very much.

CARL ICAHN: Okay. Good talking to you, Scott.

SCOTT WAPNER: You as well. That’s Carl Icahn, the billionaire activist investor, joining us there. The chairman of Icahn Enterprises.



About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver