Texaco Stock Up on Pickens Plan
The stock price of bankrupt Texaco managed a modest rally Friday after news that oilman T. Boone Pickens Jr. has entered the long-running Texaco drama.
Pickens’ intentions remain unclear. However, Texaco disclosed late Thursday that it was notified by his company, Mesa Limited Partnership, that it has disclosed to federal regulators its intention to buy more than $15 million worth of Texaco shares.
The well-known corporate raider couldn’t be reached for comment Friday at his Amarillo, Tex., offices. A key question was whether Pickens is acting in concert with another raider, Carl C. Icahn, who has amassed a 14.8% interest in the oil giant.
In his only public comments to date, Pickens said he will support Icahn’s efforts to strip Texaco of various obstacles the company has put in place to avoid being taken over.
In the past, he has sharply criticized Texaco management.
In nationwide trading of New York Stock Exchange-listed issues, Texaco’s stock closed Friday at $42.625 per share, up $1.875.
Texaco said it hasn’t had any contact with Pickens. The company said it received a letter Tuesday from a Mesa executive, I. T. Corley, saying Mesa notified the Justice Department and Federal Trade Commission of its plans to acquire Texaco shares.
“We hope that, having recognized the value in Texaco, Mr. Pickens will elect to play a constructive role and not disrupt the company’s efforts to emerge from Chapter 11, restructure and strengthen itself,” the company said.
That was a reference to Icahn’s efforts to block the company’s restructuring plan prior to emerging from bankruptcy. Texaco filed for bankruptcy last April in the wake of a jury verdict that it owes Pennzoil $10.3 billion for blocking its acquisition of Getty Oil and buying Getty itself.
Under the Hart-Scott-Rodino Antitrust Act, an investor must notify the FTC or Justice Department of any intention to acquire a stake exceeding $15 million. Texaco said the letter from Mesa said it told the FTC of plans to buy more than $15 million in common shares on the open market or through privately negotiated transactions.
At recent market prices in the $40-per-share range, a $15-million stake in Texaco would be less than 1% of the outstanding shares. FTC officials, citing confidentiality requirements of the antitrust legislation, said they could not acknowledge such a filing or disclose what it contained. Investors must say in the filings how many shares they intend to buy.
Analysts speculated that Pickens could be planning anything from an outright takeover effort with Icahn--then presumably selling off pieces of the company--to merely attacking Texaco’s anti-takeover defenses as a matter of principle. Pickens is an outspoken advocate of shareholder rights and has organized a group called United Shareholders of America.
“I would bet that his personal crusade on behalf of shareholders rights is a very important part of this Texaco move,” said one analyst, who declined to be identified.
Oil analyst Jack Aydin of McDonald & Co. said Pickens “has always been interested in Texaco. It has a lot of assets he likes, especially natural gas.”
At a meeting Friday with investment analysts, Texaco Chief Executive James W. Kinnear offered little comment on Pickens or on recent newspaper reports that Texaco is negotiating a $1-billion sale of refinery assets to Saudi Arabia.
Instead, according to analysts who attended the meeting, Kinnear made a pitch for the company’s previously announced restructuring plans. Among other steps, Texaco plans to sell off assets as part of its plan to pay $3 billion to Pennzoil in the companies’ out-of-court settlement.
Kinnear reportedly told analysts that Texaco hopes to take steps to raise the stock price enough to give shareholders a 10% return on their investment. He also said the company might sell Texaco Canada, which has had two would-be buyers in recent months.
