Jacobs to Join Icahn Against Phillips Plan

On the eve of a special meeting to vote on the Phillips Petroleum Co. recapitalization plan, Minneapolis financier Irwin L. Jacobs said Thursday that he will join dissident shareholder Carl Icahn in voting his estimated 3% stake against the proposal.

Analysts predicted that the vote taken this morning in Bartlesville, Okla., where Phillips is based, will be extremely close. Thus, they said, Jacobs’ decision to vote his reported 4.6 million shares against the proposal could play a key role in whether Phillips is able to pull the vote of more than 50% of the shares outstanding needed to approve the recapitalization plan, which proposes swapping debt for 38% of Phillips’ outstanding shares.

“Icahn is the guy who is out there attempting to get a higher value for the shareholders,” Jacobs said.

New York financier Icahn is trying to defeat the recapitalization plan so that he can go ahead with his own tender offer for Phillips, the nation’s 10th-largest oil company. Icahn is offering $60 a share for 45% of the 154.6 million shares of Phillips stock and $50 a share in debt securities for the remaining stock. Icahn already owns 7.5 million shares, or 4.85%, of Phillips stock.

The recapitalization plan was developed last December to stop a takeover attempt by Texas oilman T. Boone Pickens. If the plan is approved, Pickens’ Mesa Partners group will receive $53 a share for its stock.

Under the proposal, a new Employee Stock Ownership Plan and existing employee stock funds would end up with between 33.5% and 42% of the company, compared to the 8.9% currently owned by such funds. Jacobs said he supports the idea of letting company employees buy Phillips but added that the proposal “is not really a choice” and is unfair to shareholders.

“They (Phillips) are going to be financing the employees with the equity of the shareholders who couldn’t get out” by selling their shares at a reasonable price, Jacobs said. Phillips stock sold for $55 a share just before the Pickens bid. It closed Thursday on the New York Stock Exchange at $47.875, down 62.5 cents.

Jacobs said he told Icahn of his decision Thursday morning during a telephone call initiated by Icahn.

“He was pleased,” Jacobs said. Icahn wasn’t available for comment.

Jacobs recently sold his Phillips stock but retains voting rights on the shares because he sold them after Feb. 1. Only shareholders of record on Feb. 1 are allowed to vote on the plan.

Jacobs declined to confirm or deny widely circulated reports that his less than 5% stake actually amounted to 4.6 million shares, or about 3%, of Phillips stock.

Phillips ‘Optimistic’

A spokesman for Phillips said: “We continue to be optimistic. We expect shareholders to approve the recapitalization plan.”

But analyst David Fernow of New York-based Thomson McKinnon Securities said he believes that the dissident shareholder group “will prevail by a modest margin. I do feel the Jacobs shares may play a critical role in this regard.”

Fernow said Phillips has many “informed investors . . . who feel that the proposals are contrary to shareholder interests by shifting control of the company into the hands of employees.” The recapitalization also would “burden the company with a massive debt structure that will inhibit its future profitable growth,” he said.

James Balakian, an analyst with L. F. Rothschild, Unterberg, Towbin in New York, said the tally “is going to be very close, and I’m not willing to stick my neck out about who is going to win this vote.”

About 20% of Phillips shares owned by the Pickens group, Phillips employees and the Bartlesville community are committed to vote for the plan, which means the oil company must receive approval from another 46 million shares to pass its recapitalization plan, Balakian said. Phillips’ task is made more difficult because, if a shareholder doesn’t vote because he was confused or wasn’t notified in time, that vote is in effect a vote against the Phillips plan, Balakian said.