Energy company sues billionaire investor

Friday, March 11th 2005, 9:36 am

By: News On 6

OKLAHOMA CITY (AP) _ Energy company Kerr-McGee Corp. has sued billionaire investor Carl Icahn and his associates, claiming breach of federal antitrust laws and violation of the company's bylaws.

The lawsuit filed Thursday in federal court in Oklahoma City asks the judge to bar Icahn and his associates from voting with shares they recently acquired and seeks to have their nominations as directors nullified.

``Defendants' apparent failure timely to disclose the existence of their group ... has harmed the company and its stockholders by allowing defendants improperly to accumulate a sizable position in the company's stock and to withhold from the company information it needs to respond appropriately to director nominations,'' Kerr-McGee said in the lawsuit.

Mark Weitzen, general counsel for Icahn Investment Partners, said he had not seen the lawsuit but said it was without merit.

``It sounds like there is not any substance to it, but we will see them in court,'' Weitzen said.

Oklahoma City-based Kerr-McGee said the investors violated the Securities and Exchange Act by acting as a group without disclosing the group's existence and the members' collective intent. Kerr-McGee also alleges the investors violated antitrust laws because at least one of the partners notified regulators of its share purchases after it acquired more than the limit of $50 million worth of shares.

Kerr-McGee also claimed Icahn and his associates did not properly nominate themselves for election to the company's board, again because the nomination forms did not identify all the partners behind the nomination. The company alleges that the nomination forms also did not contain all necessary information, including detailed accounts of all company shares the nominees bought or sold within the past two years.

Kerr-McGee filed its lawsuit just hours after Icahn renewed his push for Kerr-McGee to follow his plan for improving shareholder value. Icahn increased his demands, saying Kerr-McGee should end its exploratory deep-water drilling program.

``We believe KMG can spend its money much more judiciously than to continue spending money on high-risk exploration,'' Icahn said in a letter to Kerr-McGee Chairman and Chief Executive Officer Luke Corbett filed with the Securities and Exchange Commission.

The Oklahoma City-based energy company defended its drilling program, saying its strategy has been historically successful.

Icahn's letter Thursday renewed his call for Kerr-McGee to sell its chemical business, capitalize on high commodity prices through a process of selling up to 32 percent of its future oil production in advance and use proceeds from both steps to buy back company stock. The letter also said his plan would be beneficial to Kerr-McGee and its shareholders because it would allow the company to take advantage of current near-record high commodity prices.

Company directors said Tuesday they will pursue either selling or spinning off the company's chemical subsidiary and that they plan to buy back up to $1 billion in Kerr-McGee stock.

But the directors rejected Icahn's plan for advanced sale of oil.