Icahn Extends Bid for Texaco; Shareholders to Get Their Say
Carl C. Icahn extended for three weeks his $60-per-share offer to buy Texaco, a move that effectively makes the company’s shareholder meeting June 17 a referendum on his bid. Icahn also promised Friday to divulge next week how he will pay for it.
The action came hours after Texaco’s board rejected what it called the “so-called offer,” which had been scheduled to expire at 5 p.m. EDT Friday. The board cited the abrupt expiration date and especially the lack of detail on financing in turning down the offer.
A Texaco official said late Friday that Icahn’s move “doesn’t change our response at all.”
But analysts said Texaco management will have no choice but to counter in some fashion, especially if Icahn unveils a convincing financial plan when he meets with securities analysts Thursday in New York.
“They are on the defensive now. The guy is serious,” said Jack V. Aydin, oil analyst at McDonald & Co. in New York. “I don’t think they want to take a chance on allowing the shareholders to vote on a $60 offer.”
Icahn, the chairman of Trans World Airlines and Texaco’s biggest stockholder, had already launched a proxy fight in which he is asking shareholders to back his slate of five nominees to the board. By extending the merger offer until the shareholder meeting, he is giving the shareholders a tangible reason to vote for his slate.
The $60-per-share offer has been considered a reasonable price, if Icahn could deliver. It is about 20% above the current price of Texaco shares, which closed down 37.5 cents Friday at $49.625 before Icahn extended his bid.
“It is particularly significant that neither the (Texaco) board nor its financial adviser has questioned the adequacy of our $60 price,” Icahn said in extending his offer.
If his candidates are elected to the five seats up for grabs on the 14-member board--one of which is now occupied by James W. Kinnear, Texaco’s president and chief executive--Icahn said the offer would be extended another 60 days.
Icahn, who has acquired 14.8% of Texaco’s common stock since last October, made his $12.4-billion offer Wednesday after Texaco broke off negotiations aimed at heading off the proxy fight and settling their differences.
The two sides had been thought to be near agreement on a series of steps that included a financial settlement with Icahn. But Texaco charged that Icahn demanded financial favors not available to other shareholders, which Icahn denied.
The Texaco board, citing a “total lack of supporting information” from Icahn to show he could raise the money to buy the rest of the company, said it was merely a pressure tactic to get Texaco to accede to Icahn’s demands.
Proxy Fight Begins
Texaco said its financial adviser, Morgan Stanley & Co., judged that Icahn could not obtain such financing. The company estimates that Icahn would have to come up with $20 billion to buy the 85% of Texaco that he doesn’t now own and to assume its debt and obligations.
“It is unconscionable for the board of directors to hide behind an investment banker rather than ask us how we plan to finance our $60 offer,” Icahn said.
The proxy fight began officially Friday when they began trading insults in newspaper advertisements, and a proxy statement by Icahn’s “Texaco Stockholders Committee” blasted the oil company’s performance as the worst in the industry.
“Can you trust Texaco’s future to Carl Icahn?” asked a full-page ad placed by the oil company cataloguing some contradictory Icahn statements. The Icahn group, meanwhile, retained Donaldson, Lufkin & Jenrette Securities Corp. as financial adviser and D. F. King & Co. of New York to solicit the proxies and handle press and investor relations. King was to put 300 people to work on it.
Icahn wasn’t all bad news to Texaco management, however. According to the proxy, his airline bought $85.6 million worth of jet fuel and aircraft de-icing chemicals from the company last year.
