11/01/2024

Why Does a Canadian Investor Have Its Sights Set on Occidental Petroleum?

Houston Chronicle | Jonathan Diamond | Oct. 28, 2024

Why Does a Canadian Investor Have Its Sights Set on Occidental Petroleum?

Houston Chronicle | Jonathan Diamond | Oct. 28, 2024

Occidental Petroleum said Friday that a Canadian investment firm had made an unsolicited "mini-tender offer" to purchase up to 2 million shares of Oxy common stock at $51.51 per share.

The offer by TRC Capital Investment for about 0.2% of the company's outstanding common stock came Oct. 14. Oxy said in a filing with the Securities and Exchange Commission last week that the tender was at a roughly 4.45% discount to the $53.91 closing price the day of the offer. Shares of the Houston-based oil and gas company have since fallen below the offer price, closing below $51 on Monday.

"Occidental does not endorse TRC’s unsolicited offer, has no association with TRC, its mini-tender offer or the mini-tender offer documentation, and recommends that shareholders do not tender their shares in response to the offer," the company said in its filing.

TRC has a history of such "mini tenders," generally offering to buy stakes of less than 1% in public companies at prices below the stock value at the time of the offer. In addition to Oxy, TRC recently has made such offers for Canadian telecom BCE, Dollar General and Estée Lauder Cos. Each urged shareholders to reject the offers, which were all below trading prices at the time they were made.

Investors whose holdings are less than 5% in public companies are not subject to the same SEC reporting requirements as those whose stakes exceed that level. 

"Shareholders in mini-tender offers don’t receive documents that describe the tender offer in the same detail as documents that are required to be filed in a traditional tender offer," according to the SEC. "Bidders making mini-tender offers also do not have to file documents with the SEC or provide withdrawal rights to investors who tender their shares into the offer." 

Buying shares at below the market value allows the entity making the purchase offer to turn a profit by quickly reselling those shares at market prices. 

In cautioning investors about the offer, Oxy said it its filing that, "Market volatility before the expiration of the mini-tender offer may cause the value of Occidental common stock trading in the open market to be higher (as it was on the day the offer was commenced) or lower than the value offered by TRC.  

"If the market price of Occidental shares is at or above the offer price at the expiration of the tender offer, shareholders may receive more cash by selling their shares on the open market rather than by tendering them in the offer," it continued. "Additionally, TRC’s offer is subject to numerous conditions, including that Occidental’s stock price not fall below $51.22 per share (5% less than the October 14 closing price of $53.91)."

Oxy declined to comment.