Talisman Energy Inc. stock slipped on Tuesday as investors sought to determine the strategy behind activist investor Carl Icahn's acquisition of a 6-per-cent stake in the restructuring Canadian oil producer.
Mr. Icahn, known for pushing for corporate overhauls at such companies as Dell Inc. and Chesapeake Energy Corp., disclosed a sizable shareholding in Talisman on Twitter late Monday, saying he might have discussions with the executives about "strategic alternatives, board seats, etc."
The stock surged 8.2 per cent in after-hours U.S. trading. However, on Tuesday, Talisman was off nearly 1 per cent at $13.02 on the TSX.
Talisman is already undergoing a major revamp under CEO Hal Kvisle, who has put up to $3-billion (U.S.) worth of assets on the auction block in countries such as Canada, Norway and Colombia. Deals have been slow to emerge against a backdrop of weak markets for sellers of energy properties.
Some analysts said Mr. Icahn's entrance as a shareholder – a position accumulated through a series of put and call options at a cost of $277-million (U.S.), according to a regulatory filing – could hasten a company sale or split-up, although one questioned his ability to attract buyers given Talisman's relative costliness based on current cash flow, and the buyer's market for energy properties.
"Arguably, with Talisman trading where it is at a premium to the group, a lot of that upside expectation has been built into the stock because the company's been very vocal that they are evaluating everything in terms of crystallizing value," said Chris Feltin, an analyst at Macquarie Securities.
"So it's tough to see why a buyer would come in and pay a premium for Talisman when it's already at a premium to peers."
That is especially the case now that state-owned enterprises from countries such as China have not launched a major corporate takeover since CNOOC Ltd.'s $15.1-billion (U.S.) acquisition of Nexen Inc. last year, Mr. Feltin said.
According to the filing with the U.S. Securities and Exchange Commission, Mr. Icahn intends to have a conversation with the company's management to discuss matters to "enhance shareholder value" such as asset sales or a potential restructuring.
Mr. Kvisle has laid out a path that includes embracing operations in the Americas and Southeast Asia as core to the future of the company, as they offer the best returns. That includes the Marcellus shale gas fields in the northeastern United States, the Eagle Ford oil and gas formation in Texas, the Duvernay shale play in Alberta and energy fields offshore Malaysia and Vietnam.
The plan has included the addition of three new board members and the opening of data rooms for properties around the world. The availability of so much confidential information could help a suitor make up its mind to launch a bid for the company, Canaccord Genuity analyst Phil Skolnick said. He has said for months that Talisman is headed toward a sale.
"Mr. Icahn can expedite this outcome," Mr. Skolnick said in a note to clients. Intentionally or not, Talisman put up a "for sale" sign in March when Mr. Kvisle told investors he believed the company was worth $17 to $25 as share, he said. Mr. Skolnick's current target price is $16, although he said the company has an "unrisked sum-of-the-parts value" of around $22 to $23 a share.
BMO Nesbitt Burns analyst Randy Ollenberger said the shares are currently trading at a discount to the company's breakup value of $15.71 and net asset value of $18.40, but at a premium to the peer group.
"No doubt many investors will be hopeful that Icahn's involvement could accelerate the restructuring process; however, we are also cognizant that this process has been under way for more than a year and company management has previously stated that they have exhaustively considered all the possibilities that have been put forward," he said in a report. "Accordingly, we continue to recommend a 'wait and see' investment posture rather than speculate that an acquirer emerges."