Jacobs Attacks Phillips Debt-Swap Plan, Says He’s Acquiring Stock
Minneapolis financier Irwin L. Jacobs on Friday attacked Phillips Petroleum Co.’s plan to swap debt for 38% of its outstanding shares and disclosed that he has been aggressively buying Phillips stock on the gamble that a more lucrative deal will materialize.
In a telephone interview, Jacobs said he has used his own resources, and not those of Minstar Inc.--a Jacobs-controlled company--to purchase less than 5% of Phillips’ 154 million shares.
Phillips officials declined to comment on Jacobs’ move, but the Bartlesville, Okla.-based company said that it has set Feb. 22 as the date for a special shareholders meeting to vote on the recapitalization plan. At least 51% of Phillips’ shareholders must approve the proposal, and only those shareholders of record on Feb. 1 will be allowed to vote, according to Dan Harrison, Phillips’ public information coordinator.
Jacobs said he opposes the plan because not all shareholders will be able to trade their shares for new debt securities, to be valued at $60 each. “It should be offered to everybody,” Jacobs said. “It disenfranchises those shareholders who couldn’t get out.”
Jacobs contended that the Phillips plan could be revised to allow the employees to buy the entire company, and he insisted that he is not trying to force the oil company to merge with another firm.
‘Grave Risk’ Seen
The 43-year-old financier commented, however, that “it’s hard to believe that there’s not a marriage out there for them somewhere.”
Some analysts expressed doubt that Jacobs can smoke out a higher offer.
Joel D. Fischer, a vice president at Drexel Burnham Lambert Inc. in New York, said: “There is grave risk in what he’s attempting to do.” Fischer said he does not believe other oil companies will rush to make an offer, because prices have softened in the oil market and some executives believe that “if you hold back, assets may become available more cheaply.”
He added that, in the last few months, he has sensed that companies are less willing to be “stampeded by their investment bankers” into mergers that result in the assumption of massive debt.
On the New York Stock Exchange on Friday, Phillips shares rose 75 cents to close at $48.75, as 2.96 million shares were traded.
Phillips is already committed to assuming great debt under its recapitalization plan. If approved, the company’s debt could climb to about $7.4 billion, up from $2 billion, according to a recent study made by Salomon Brothers Inc., a major Wall Street securities firm.
Salomon Brothers estimated that the oil company would face annual interest payments of about $754 million, up from $205 million.
Challenge From Pickens
Phillips devised the plan to defend itself against unwelcome takeovers after an investor group led by Texas oilman T. Boone Pickens offered $60 a share for up to 23 million shares of Phillips stock, as a first step in taking control.
Phillips persuaded the Pickens group to withdraw its offer by promising to restructure the company and promising that the Pickens group could sell its shares for at least $53 each to either Phillips or the underwriters that handle the new debt issue. The deal would net the Pickens group a profit of about $90 million.
Jacobs vowed that he would not agree to sell his shares to the company unless other shareholders are offered identical terms. “I’m not a greenmailer,” he said, referring to the practice of some large investors who accept a premium price for their shares in exchange for their promise not to invest in the company for a lengthy period of time.
Jacobs said he has not contacted other shareholders to join him in a fight to defeat the recapitalization plan, and he said he has not contemplated a fight to unseat the board of directors. Under the company’s current bylaws, a majority of shareholders could unseat the board or call a special meeting.
Harrison, the Phillips spokesman, would neither confirm nor deny a published report that Phillips’ management has recommended the adoption of anti-takeover measures at the shareholders meeting Feb. 22. Harrison said he could not comment because the company’s proxy material is still under review at the Securities and Exchange Commission.
