Nov 11 (Reuters) - Transocean Ltd said it reached an agreement with Carl Icahn that would see the offshore driller paying out a dividend and reducing the number of board seats, in a move that resolves a months-long proxy battle.

As per the agreement, Transocean would pay a $3 dividend, while reducing the maximum number of directors to eleven from fourteen. Icahn had previously pressed for a $4 per share dividend.

Icahn, after disclosing his 5.6 percent Transocean stake in January, has gone after the world's largest drilling contractor over "ill-advised" mergers and "unsuccessful" development strategies.

The activist investor has been campaigning for a higher payout and calling for major changes to the Switzerland-based company's board.

Transocean introduced its first regular dividend in nine years in 2011, but decided to halt it while working through the prolonged legal process to determine liability for the 2010 Gulf of Mexico spill, which involved one of its rigs.

Transocean on Monday said it would implement a Master Limited Partnership-type yield vehicle ("MLP") to provide additional financial flexibility.

The initial public offering of the MLP is expected to be completed around the middle of 2014 with a minority interest sold at that stage, the company said in a statement.

The deal will also see the re-election of Samuel Merksamer and the appointment of Vincent Intrieri to the board.

Merksamer is employed by Icahn Capital LP, a subsidiary of Icahn Enterprises LP, and was elected to the company's board at its 2013 annual general meeting in May.

Intrieri has been employed by Icahn-related entities for the past fifteen years in various investment related capacities, Transocean said.

As per the agreement, Transocean will target an improvement in operating margins of about $800 million by the end of 2015. The company earlier promised to cut $300 million of costs by 2014.

Icahn Group has agreed to vote in favor of director nominees and certain other proposals Transocean may recommend at the 2014 AGM, the company said.

"I am pleased that the board has agreed to add Vince Intrieri as a nominee, and to reduce the board size to eleven and I am especially happy about the commitment to pursue a MLP, raise the dividend and increase margins by $800 million through cost cutting and increased efficiency," Carl Icahn said in a statement on Monday. (Reporting by Sakthi Prasad in Bangalore; Editing by Supriya Kurane)