Texaco Says It’s Still Talking to Head Off Fight

Texaco Inc., meeting with Wall Street analysts, said Monday that it is still in talks with investor Carl C. Icahn to head off a fight for seats on the company’s board.

But President James W. Kinnear had no report on an agreement that had been widely expected to be reached Monday. He said it is still possible that Icahn will make good on earlier vows to contest five board openings next month, but talks will continue between Icahn and Texaco.

“My profoundest hope is that it can be done without a proxy fight,” Kinnear told analysts at a meeting also attended by journalists.

An agreement would end months of wrangling over the company’s restructuring and Icahn’s fight to gain control of the oil giant.

Under the proposed agreement being discussed, informed sources said earlier, Icahn would drop his proxy fight to gain control of five seats on Texaco’s 14-member board of directors. The White Plains, N.Y.-based oil company would drop its civil suit charging the New York investor with violating federal securities laws in his fight with Texaco.

The deal would also allow Texaco management to proceed at its discretion with a previously announced restructuring plan, under which it would sell $5 billion in assets.

Texaco stock closed on the New York Stock Exchange at $42.125 a share on Monday, down $1.50 from its Friday close. It has slipped more than $4 per share in a week.

Icahn, who holds 14.8% of Texaco’s stock, most of which he acquired last year, has been seeking to hasten the firm’s restructuring, which he thought was proceeding too slowly. He has complained the company’s stock is undervalued and that management has not done enough to boost its price.

Sources said Icahn became willing to drop the proxy fight after he became convinced that Texaco management was serious about proceeding with the restructuring.

It was not immediately clear if any final pact would include an agreement prohibiting Icahn from increasing his Texaco stake.

But the understanding was that Icahn would become a more passive shareholder and not strive to influence Texaco’s restructuring. “That will be left entirely up to the company,” one source said.

Under the pact, Icahn himself would not become a Texaco director. “He’s not a board member at USX,” one source close to the talks said. “And I would think his relationship with Texaco is evolving in that direction.”

Texaco has outlined plans to sell $5 billion of assets and 60 million barrels of crude oil reserves.