Pennzoil: Next 2 Weeks Critical in Texaco Fight

Pennzoil Chairman Hugh Liedtke indicated Thursday that the next two weeks will be critical for Pennzoil’s $10.3-billion battle with Texaco and reiterated his resolve to settle for more than $2 billion, Texaco’s highest offer so far.

Unless the two sides are able to settle “in the next couple of weeks maximum,” Liedtke told reporters after the company’s annual meeting here, it is “very doubtful” that either the legal war or Texaco’s bankruptcy proceedings, which were precipitated by the court battle, will end any time soon.

After that, the two creditors’ committees overseeing Texaco’s court-aided reorganization will have such control that Texaco officials will find “they have given up the management . . . to a whole bunch of committees,” Liedtke predicted. As Texaco’s largest creditor, Pennzoil is the co-chairman of one of those committees.

The Pennzoil chairman, whom Texaco has portrayed as greedy and foolish for turning down Texaco’s offer of $2 billion to settle their dispute over whether Texaco wrongfully interfered with Pennzoil’s plan to buy Getty Oil, said he isn’t sorry for turning down the $2 billion, and would do the same again. Texaco sought protection under Chapter 11 of the U.S. Bankruptcy Code last month to prevent any possible seizure of its assets by Pennzoil during the lengthy appeals process.

“We’ve made it quite clear that we’re available at any time” for settlement talks, Liedtke said. “But if they’re still talking $2 billion, there’s no use talking.”

To accept $2 billion, Liedtke told the gathering of about 800 Pennzoil shareholders--a decidedly pro-Liedtke crowd that greeted his remarks with thunderous applause and a standing ovation--would be to invite shareholder lawsuits.

(Late Thursday, Texaco issued a blistering response to Liedtke’s remarks. In a statement issued from its White Plains, N.Y., headquarters, the company accused Pennzoil of trying to “bludgeon Texaco into an unreasonable settlement” by making threats. Pennzoil’s “failure to budge” has created an impasse, and it is responsible for the bankruptcy filing, Texaco said.)

Liedtke recounted for shareholders the events leading up to Texaco’s April 12 bankruptcy filing. He said a letter proposing a settlement for more than $2 billion was hand-delivered to Texaco Chief Executive James W. Kinnear on April 11. That same morning, Liedtke said, Kinnear invited the Pennzoil chairman to New York to discuss the proposal the following afternoon.

Liedtke said he canceled his plans and caught a plane for the meeting in New York, but Texaco filed for bankruptcy protection before he arrived.

“I really didn’t think anybody would be that irresponsible,” he said in recalling his reaction to the filing, a threat he had always dismissed as a bluff.

While declining to name his price, Liedtke said several securities analysts have concluded that Texaco can afford a settlement of $4 billion to $5 billion. He also told reporters that “I happen to think” Texaco can afford to settle for between $3 billion and $5 billion.

Responding to a shareholder question, Liedtke said that Pennzoil “has had no discussions now or ever about buying Texaco” because “Texaco has problems that we do not feel would be wise for our shareholders to get into at this time.”

Hoping to silence critics who liken Pennzoil’s appointment as co-chairman of a Texaco creditors committee to a fox supervising a henhouse, Liedtke also vowed that Pennzoil won’t “be vindictive or obstructionist” in its role.

But neither, he said, will it “be stampeded into any precipitous action” or tolerate any moves by Texaco to keep critical information from the committee of industry competitors.

Texaco has indicated that it intends to keep certain proprietary information from the competitors’ committee that it will make available to a separate committee of bankers, insurance companies and other general creditors.