Pickens Attacks Phillips Plan to Block Takeover
Texas oilman T. Boone Pickens, who with his partners owns nearly 9 million shares of stock in Phillips Petroleum Co., on Monday attacked a “poison-pill” defense adopted recently by the company’s directors to fend off unfriendly takeovers.
The criticism by Pickens added to the uncertainty surrounding the efforts of the Bartlesville, Okla.-based oil company to remain independent and could undermine support for its recapitalization plan, scheduled for a stockholder vote Feb. 22. New York financier Carl Icahn is expected this week to launch a tender offer of $57 a share for Phillips stock and may still go through with an earlier threat to take over the company.
Unocal ‘Not for Sale’
Meanwhile, another oil company that is the subject of takeover speculation, Los Angeles-based Unocal Corp., said in a statement that it is “not for sale.” The statement was issued in response to an article in Business Week magazine indicating that Unocal Chairman Fred L. Hartley would support an offer for the company, parent of Union Oil Co. of California. Persistent Wall Street rumors have suggested that the Pickens group may select Unocal as its next takeover target, although Pickens has not commented.
Unocal was the most actively traded stock on the New York Stock Exchange on Monday, closing at $49.75 a share, up $1 from Friday. Phillips was also active, closing at $50 a share, down $0.125.
Pickens, chairman of Mesa Petroleum Co. of Amarillo, Tex., said the recent action by the Phillips board will “complicate the issues” to be voted on at a special stockholders meeting scheduled for later this month. Under terms of the new provision, the company will issue warrants to stockholders allowing them to exchange each of their shares for a $62, one-year debt security in the event that any investor acquires more than 30% of Phillips stock.
The action is intended to discourage an unfriendly takeover, but Pickens charged that it “was designed to entrench existing management and short-stop a proposed tender offer to the shareholders of Phillips.” The board approved the action in response to Icahn’s threat to take over the company, which was later scaled down to plans to raise his Phillips stake to 30%, thereby triggering the terms of the new provision.
In an amended proxy statement filed with the Securities and Exchange Commission on Monday, Phillips said the rights to redeem stock for the $62 debt security will not apply to a stockholder having at least 30% of the shares. Icahn has vowed to fight this interpretation but has said that, if he loses, he will carry out his initial plan to offer $55 a share in debt and stock for all of Phillips’ shares.
If the recapitalization plan is approved by stockholders, Pickens’ Mesa Partners group will receive $53 a share for its holdings. Pickens is committed to supporting the recapitalization, but his criticism of it could prompt other stockholders, particularly large institutions, to vote their shares against it. An estimated 47% of Phillips stock is owned by institutions such as banks, mutual investment funds and pension funds.
In the case of Unocal, the statement by Hartley was the strongest to date on the topic of mergers made by the company, which ordinarily declines to comment on rumors that it could be the target of a takeover.
“It is our strong desire, repeatedly affirmed by the board of directors, to continue to operate Unocal an an innovative, high-technology company concentrating on long-term growth,” Hartley said.
