Texaco Inc.'s directors and a committee of the company's shareholders reached agreement on changes in Texaco's bylaws late Tuesday, the eve of a court hearing on the firm's bankruptcy reorganization plan.
Texaco announced the agreement, which amounted to an effort to solidify shareholder support for its plan against the one put forward by financier Carl C. Icahn, who controls the biggest block of Texaco stock.
In a statement, Texaco said the agreement would give its shareholders "additional protections from certain unfair takeover practices by raiders seeking to plunder shareholder equity."
The provisions agreed on Tuesday were clearly intended to thwart any efforts by Icahn to take over the oil giant.
Texaco said the agreement alters the "poison pill" defense that would make it prohibitively expensive for a raider to try to take over the company.
It includes a prohibition against "greenmail," a term used to describe the purchase of stock by a potential raider who later agrees to sell his stake at a premium above the market price for the shares.
Texaco said the agreement also would place a proposal before shareholders at the next annual meeting that would lower to two-thirds the majority required to amend the company's charter. Currently, an 80% majority is required.
Icahn's reorganization plan would remove the anti-takeover provisions in Texaco's charter. He is also trying to overturn part of last month's settlement between Texaco and Pennzoil Co. of the multibillion-dollar legal dispute that has preoccupied both companies for three years.
On Tuesday, Icahn said he had raised his stake in the company to 14.3% of all its shares from 13.3% previously.
U.S. Bankruptcy Court Judge Howard Schwartzberg is to hear arguments growing out of the settlement today in White Plains, N.Y., where Texaco is based.
Icahn says dropping the anti-takeover measures would give its management more incentive to do a better job.
Agreed to Settlement
Texaco's top executives counter that Icahn's plan would make the nation's third-largest oil company vulnerable to dismemberment by a predator--such as Icahn--who could make a quick profit by selling it off in pieces, destroying the company's competitive future and the long-term value of stock held by other investors.
Texaco agreed last month to pay Pennzoil $3 billion to drop the $10.3-billion judgment that Pennzoil won in the Texas courts. A jury ruled that Texaco had interfered with Pennzoil's 1984 attempt to acquire part of Getty Oil Co. so it could buy Getty itself.
The settlement was the basis for Texaco's overall reorganization plan. The oil giant took refuge under Chapter 11 of the U.S. Bankruptcy Code on April 12 to avoid having to post a potentially ruinous bond while appealing the damage judgment.
The plan was worked out among Texaco, Pennzoil and committees representing Texaco's shareholders and creditors.
Under bankruptcy law, Schwartzberg must hear comments on that proposal--and any others--before deciding whether to submit it to shareholders, with or without alternative proposals.
Two-thirds of the shares participating in the vote must favor one plan before Schwartzberg could give it final approval. Technically, he could overrule a negative vote, if he deemed a plan fair and equitable. But attorneys said that would be most unlikely to happen.
Schwartzberg also is to hear a suit filed by Icahn last week asking that the court void a Texaco-Pennzoil agreement requiring Pennzoil to support Texaco's reorganization plan.
Icahn claims the agreement is illegal and should be thrown out. Texaco denies the allegations.
In another hearing on Jan. 27, Schwartzberg is scheduled to hear objections to Texaco's disclosure statement, a document filed Dec. 31 outlining its financial situation.
If there are no objections that cannot be resolved at that hearing, Schwartzberg will then authorize the shareholders' vote.
Texaco officials say they expect the ballots could be mailed by mid-February and returned by mid-March.
Assuming passage, the judge would hold one more hearing, probably within the first few days of April, to confirm the verdict and announce Texaco's emergence from bankruptcy. This could happen around the middle of April. On that date, Pennzoil will receive its money, they say.