Court Action Delays Final Tally in Phillips Vote : Company Won’t Release Results on Recapitalization Plan Until Wednesday
David Oakley hopes to find out whether his car dealership is going to survive. Gerald Coast wants to know whether his real estate and construction business is going to pick up. And Gary Winters needs to know whether his bank can ease up on its loan policy.
They and the rest of this town’s 38,000 residents have had a lot of sleepless nights over the past few weeks, awaiting the outcome of a vote that could keep Phillips Petroleum Co. intact as the state’s largest private employer or take it the first step toward liquidation.
“People are getting pretty scared,” said Winters, president of Plaza Bank here. “We need an answer.”
The answer had been expected Friday at the conclusion of a special stockholders meeting called to vote on the company’s complicated recapitalization plan designed to prevent an unwanted takeover of Phillips.
Continues Suspense
But a court hearing across the country in Delaware led Chairman William Douce to adjourn the meeting until Wednesday before announcing the results, continuing the suspense that had gripped this northern Oklahoma community since Texas oilman T. Boone Pickens launched an attempted takeover of Phillips in early December.
Douce declined to say how the voting has gone so far, but criticism of the plan at Friday’s meeting and the company’s unusual efforts to win support for it indicate that its approval is far from assured.
A number of stockholders at the meeting expressed confusion about the proposal, and several criticized management for adopting such an expensive strategy merely to ward off the unwelcomed advances of an investment group led by Pickens, chairman of Mesa Petroleum Co. of Amarillo, Tex., and a former Phillips employee.
“This is the flotsam that was thrown upon the shore by the Phillips-Pickens payoff deal,” said stockholder Albert I. Edelman, who has filed a civil class-action lawsuit against the company to overturn the arrangement. “It is self-serving and rather destructive of stockholder rights and it undermines the economic viability of Phillips.”
Edelman’s lawyers Friday went before a state judge in Delaware, where Phillips is incorporated, seeking an injunction to prevent Phillips from counting ballots on grounds that not all shareholders had been able to cast the votes before the polls were closed.
Before the Chancery Court judge could rule on that request, however, Phillips lawyers said the company will simply keep the balloting open until next Wednesday, at which time it will announce the results.
The new delay won’t do much to ease local fears that defeat of the recapitalization plan would undermine, or at least leave in doubt, the economic future of their community, located about 40 miles north of Tulsa.
Bartlesville exists because Frank and Lee Phillips struck oil near here in 1905, and the company’s success has turned the community into the most affluent in the state. About 8,000 of the city’s residents work for Phillips and many more continue to live here after they retire.
“If the company is bought by a liquidator, Bartlesville will be gone,” said banker Winters, who says he has become much more conservative about making commercial and real estate loans until the company’s future is more certain.
About 4,000 stockholders and company employees jammed into the Adams Building gymnasium, many coming at least an hour ahead of the 10 a.m. starting time to be assured of a seat.
Pickens did not come, nor did New York financier Carl Icahn, whose opposition to the recapitalization plan prompted him to campaign for its defeat and to launch a tender offer for the company’s stock.
Icahn has claimed that Phillips’ agreement to pay Pickens $53 a share for his stock plus $25 million in expenses is not fair to other stockholders.
In agreeing to pay Pickens a premium for his shares, the company proposed the recapitalization plan under which other stockholders are to receive debt securities for 38% of their shares. The company has said that this will give all stockholders the equivalent of $53 a share.
Disputes Plan’s Worth
But Icahn said his analysis showed the plan to be worth only $43 a share to stockholders, prompting him to offer $60 a share for the stock in a tender offer, apparently in hopes of later finding someone who would pay him more.
The confusion caused by the plan was a major issue at Friday’s meeting. One stockholder said he is uncertain of the tax consequences of the proposal, while another wanted to know how it would affect his dividend payment.
Even some of those who supported the plan said they fear that it is not the best deal economically for them.
And money was the key consideration for the managers of investment funds, pension funds and other institutions that own about 47% of Phillips’ outstanding stock.
Tom Aceituno, legal counsel to California Treasurer Jesse L. Unruh, said the state’s employee and teacher pension funds voted their 124,650 shares against the plan.
“We think the plan is worth substantially less than the value placed on it by management,” Aceituno said, adding that he also didn’t like the payment to Pickens, the proposed staggered terms for the directors or the “poison pill” defense that the company adopted to prevent anyone from buying the firm for less than $62 a share.
Found Little Support
A fund manager who asked not to be identified said in an interview that he found little support for Phillips among other big institutional holders, and he said the sentiment seemed to turn against the company within the last few days.
“Pickens flies in two months ago and comes out with a pheasant under his arm,” the fund manager said. “The other investors who have been with the company for years are offered a confusing program with a lot of risks.”
Alfred Kingsley, senior vice president and director of research at Icahn & Co., the financier’s private investment firm, said the problem was that the company was not making the same offer to all of its holders.
“We don’t want to bust up or break up Phillips, “ he told the other stockholders. “What we want is fair value for our shares, fair value for the people who really own the company.”
