Icahn Proposes Bid of $8.1 Billion to Counter Refinancing at Phillips

Times Staff Writer

New York financier Carl Icahn added a new twist to the restructuring of Phillips Petroleum Co. on Tuesday by proposing to offer $55 a share for the oil company's stock, a move analysts say is designed to force Phillips to sweeten its own $53-a-share refinancing offer.

Icahn, a veteran of a number of corporate takeover battles, is one of several Wall Street speculators who acquired large blocks of Phillips shares during the company's recent effort to fend off Texas oilman T. Boone Pickens.

Pickens had offered $60 a share for Phillips stock in a plan aimed at buying out the company's public shareholders by borrowing against its assets.

Although analysts doubt that Icahn will be able to take over Phillips, they say his proposed $8.1-billion bid, combined with other investor opposition to Phillips' recapitalization plan, could lead stockholders to reject the company's proposal when they meet to consider it Feb. 22.

Willing to Withdraw

Icahn's offer could also prompt a major oil company or other large firm to make a competing bid for the Bartlesville, Okla., petroleum firm.

Icahn, saying he owns 7.5 million shares, or 4.85%, of Phillips' stock, said in a letter to Phillips Chairman William Douce that he will "gladly" withdraw his plan if the company matches his offer of $55 a share to all stockholders. But if Phillips turns him down, Icahn said he would launch a bid to take over the company.

He said in the letter that he found the Phillips offer, disclosed in final form in a proxy statement issued Friday, to be "grossly inadequate."

He said an analysis done for him by the Wall Street firm of Donaldson, Lufkin & Jenrette Securities Corp. valued the recapitalization package at $42 a share, well below the $53 a share placed on it by Phillips management.

Phillips has proposed buying back 38% of its stock in exchange for debt securities valued at $60 a share, issuing new stock to an Employee Stock Ownership Plan and spending $1 billion over the next year buying its own stock on the open market to support the price at the $50-a-share level.

For all stockholders, the company contends the offer is valued at an average price of $53 a share.

Phillips stock has been trading in the $42-to-$47 range since the recapitalization proposal was announced in December, but rose $3.125 a share to close at $50.25 on Tuesday as the most active issue on the New York Stock Exchange. More than 5.1 million shares changed hands.

Wants Quick Response

Icahn gave Phillips mangement until the close of business today to respond to his offer, saying his investment bankers need all the time available to raise the $4.05 billion needed to finance the bid before the Feb. 22 meeting of stockholders.

Phillips officials declined to comment Tuesday beyond saying that they have requested more information from Icahn about his proposal.

The plan was delivered to Phillips' investment bankers late Monday night in the form of the letter from Icahn to Douce. It was accompanied by a copy of a letter to Icahn from Drexel Burnham Lambert Inc., his investment banker, expressing confidence that the money to finance the deal could be raised in time.

Icahn has proposed offering a combination of $27.50 cash and a debt security valued at $27.50 for each of Phillips' outstanding shares, giving the deal an indicated value of $8.09 billion.

If Phillips turns him down, he said he will offer $55 cash for 51% of Phillips stock and exchange debt securities valued at $55 a share for the remaining 49%.

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