Holmes a Court Discloses 6.4% Investment in Texaco : Australian Says Stock Is Undervalued, Assures Company He Won’t Interfere in Management or Attempt Takeover
Australia’s richest man, investor Robert Holmes a Court, disclosed Wednesday that an investor group he heads has acquired 6.4% of Texaco for $541 million, but he assured Texaco that the purchase is only an investment.
The disclosure, in a filing with the Securities and Exchange Commission, confirmed the reports of a major Holmes a Court accumulation of Texaco stock that have been circulating on Wall Street for nearly two weeks. Speculation had him buying 3 million to 8 million of Texaco’s 240 million shares; he said Wednesday that he actually owns 15,507,300 shares.
And despite his assurances in a letter to Texaco President James W. Kinnear that he has “no desire or intention to influence Texaco’s basic business decisions or its management,” the announcement also fueled speculation that this is just the first salvo in a takeover battle for the nation’s second-largest oil company.
Somber Mood at Texaco
At Texaco’s headquarters in White Plains, N.Y., late Wednesday, the mood was somber, as executives searched for clues to Holmes a Court’s real intent.
Officially, the company issued a statement saying: “We assume that he shares the view expressed by others that Texaco’s shares are at present undervalued and the stock is a good long-term investment.”
Holmes a Court’s filing said his takeover vehicle, the Bell Group of Perth, Australia, paid an average of $34.90 a share for Texaco’s stock. In trading on the New York Stock Exchange Wednesday, Texaco stock closed at $37.50 a share, up 87.5 cents, and was one of the most actively traded stocks--even without the Holmes a Court disclosure, which came after the market had closed for the day.
The stock had languished for weeks after Texaco turned to the bankruptcy courts last month as a haven from its legal setbacks with Pennzoil. But for nearly two weeks, rumors of a takeover by Holmes a Court or Texas oilman T. Boone Pickens or--most recently--British corporate raider Sir James Goldsmith have lit a fire under the stock.
Wall Street was abuzz earlier Wednesday with rumors that Goldsmith had acquired 5% of Texaco’s stock and had hired Shearson Lehman Bros. to advise him on takeover of the firm. That could not be confirmed with either Goldsmith or Shearson, and Texaco wouldn’t comment.
Holmes a Court couldn’t be reached for further comment about his intentions.
In his filing, he said his companies bought Texaco shares because the stock market “has overreacted severely in devaluing Texaco’s stock to current market levels,” when in fact the “intrinsic value of Texaco’s assets is substantially higher.”
Although Wall Street is eager to see a bidding war develop for Texaco and Holmes a Court is a seasoned and tenacious corporate raider, the early thinking about his acquisition by takeover advisers and Wall Street analysts is that his purchase is only an investment.
“I don’t think he really wants Texaco,” said a Wall Street oil analyst who has researched Holmes a Court’s earlier forays but asked not to be identified. “He has said many times before that he is just as content making money by investing and then pulling out as he is in running the company, and I think that’s just what he’ll do.”
Bankruptcy lawyers also have minimized talk of a Texaco takeover. Citing certain bankruptcy law guarantees, some lawyers say it is exceedingly difficult for anyone to orchestrate a hostile takeover in the first 120 days after a company has filed for court-assisted reorganization.
Texaco, while solvent, chose to file for protection under Chapter 11 of the bankruptcy laws on April 12 after a series of setbacks in its battle with Pennzoil--both in court and at the bargaining table. Texaco is fighting a court decision ordering it to pay a record $10.3 billion in damages to Pennzoil over their disputed rights to acquire Getty Oil.
Pennzoil, which is co-chair of one of two creditors committees overseeing the Texaco reorganization, had no immediate comment on Holmes a Court’s filing.
Holmes a Court, a 50-year-old South African-born lawyer from an aristocratic and wealthy British family, laid the foundation of his empire in 1970 when he took over and rescued an Australian woolen mill. His personal fortune is estimated at more than $200 million.
Through the years, he has made runs at several industrial companies and media conglomerates, eventually bowing out of each at a profit. Most recently, he dropped his $1.32-billion offer for the Herald & Weekly Times Ltd., Australia’s largest media concern, after losing a race with his fellow countryman and rival, Rupert Murdoch.
Last year, he sold a large stake in USX, Pittsburgh-based parent of U.S. Steel, for an estimated profit of $15 million after waging what was widely viewed as a takeover run on the company.
