and Carl Icahn achieved detente Thursday with the oil company agreeing to buy back $4 billion worth of common shares at prices that would represent all-time highs for the stock.
Icahn, who along with hedge fund Jana Partners has recently railed against Kerr-McGee for supposedly squandering shareholder value, dropped a threat to nominate two directors to the oil company's board. Kerr-McGee also agreed to end litigation accusing Icahn and Jana of colluding against the company without making appropriate
The company agreed to sell its chemicals business, another of Icahn and Jana's demands, in early March. Icahn and Jana own about 11 million Kerr-McGee shares, or about 7.7% of its outstanding stock.
The Icahn group had originally insisted on a $10 billion buyback and the forward sale of a big chunk of Kerr-McGee's oil reserves, saying the company was wasting money drilling for oil.
"This settlement enables the company to deliver on its commitment to deliver stockholder value and to advance its strategy as a pure-play exploration and production company," Kerr-McGee said. "Our conversations with Mr. Icahn and Jana have been productive."
Kerr-McGee will use a shareholder-friendly Dutch auction to repurchase the shares. The company will pay at least $85 and no more than $92 for each share it buys back. The shares closed Thursday at $73.97 and were recently trading up $8.18, or 11.1%, to $82.15.
Icahn became famous in the 1980s for a financial tactic known as "greenmail," in which he bought significant stakes in companies and threatened proxy battles unless management agreed to buy back his stock at an above-market price.
The tender offer replaces the initial $1 billion share-repurchase program announced by the company on March 8. Under that, the company repurchased $250 million of Kerr-McGee shares in the open market.
If the tender is fully subscribed, $4 billion of common stock will be repurchased, representing approximately 27% to 29% of Kerr-McGee's 160.3 million shares outstanding.