Kohlberg Kravis Seeks Bigger Stake in Texaco

Adding another wave to the roiled waters of Texaco’s post-bankruptcy reorganization, the aggressive investment firm of Kohlberg, Kravis, Roberts & Co. said Tuesday that it is asking federal permission to increase its stake in the oil giant to up to 15% of the stock.

Such a holding would make KKR, which is known for arranging buyouts of businesses across the corporate spectrum, the second major presence among Texaco shareholders. Corporate raider Carl C. Icahn, who owns about 15% of Texaco, has been a vocal figure in the company’s bankruptcy proceedings and has said he will sponsor a dissident slate of directors at Texaco’s board meeting in May.

T. Boone Pickens Jr., another raider, has also asked antitrust permission to own up to 15% of Texaco stock.

KKR owns 11.9 million Texaco shares, or about 4.9%, which it said were purchased several months ago on the open market. KKR did not say how much it spent for the shares. In its announcement, it said it would ask antitrust permission under the Hart-Scott-Rodino Act to hold up to 15% of Texaco stock.

Must Restate Intentions

It was unclear Tuesday whether KKR actually intends to increase its holdings materially, or is making its filing to ensure itself an active voice in the post-bankruptcy life of Texaco.

Under Hart-Scott-Rodino rules, investors must get Justice Department approval before owning more than $15 million, or up to 15%, of a company’s stock--unless it intends to remain an entirely passive investor. KKR, whose holdings are worth far more than $15 million, had earlier declared itself a passive investor and thus must restate its intentions before exercising any sort of active role in the company.

“It just became very clear to them that with third and fourth and fifth parties appearing in Texaco, it doesn’t make sense for them to be passive and not be able to talk to management,” said one source close to the firm. What KKR hopes to achieve through such contact with management could not be learned.

Still, the firm’s move comes amid signs of an emerging battle royal for Texaco, which won court approval this month to emerge from protection under Chapter 11 of the bankruptcy code. Texaco last April sought bankruptcy protection as a refuge from Pennzoil, which stood to collect a more than $10-billion court judgment it won as a result of its claims that Texaco had interfered with its own plan to acquire Getty Oil Co.

Stocks Closes Higher

As part of its bankruptcy reorganization Texaco will settle the Pennzoil claim with a $3-billion payment April 7. The oil company also pledged to place $1 billion in escrow over the next five years to settle a $6.5-billion claim from the Internal Revenue Service for back taxes.

With those liabilities cleared away, oil industry analysts say, the company may be worth as much as $68 a share, based on appraisals of its oil reserves and refining and retail businesses. In trading on the New York Stock Exchange, where it was the third most active stock, Texaco closed at $48, up $3.25.

“Whether there will be five sharks owning 15% each or two sharks, I can only guess,” said Frank P. Knuettel, an analyst for Prudential-Bache Securities in New York.

For its part, Texaco called KKR a “constructive shareholder” that “recognizes the importance of building value for the long term.”

“We have no indication that (KKR’s) intentions with Texaco are any different,” a spokesman for the oil company said. We are hopeful that Kohlberg Kravis will play a constructive role as Texaco pursues prompt and aggressive steps to restructure our company and maximize total value and return for all our shareholders.”

TEXACO OWNERSHIP

The investment banking firm Kohlberg, Kravis, Roberts & Co. plans to ask for permission to buy up to 15% of Texaco’s 242.8 million shares outstanding. Texaco Chairman Alfred C. DeCrane Jr., right, is one of 32 corporate insiders that owns stock in the giant oil company. Financier Carl C. Icahn, left, owns 14.8% of the firm’s shares.

Number Shares or bonds of owners (thousands) Held as of Investment Companies 107 12,716 Dec., 1987 Major Institutions 326 85,488 Dec., 1987 Corporate Insiders 32 346 Jan., 1988 Owners of 5% or more Bell Resources 12,096 Jan., 1988 Carl C. Icahn 36,061 Feb., 1988

Source: CDA Investment Technologies