Icahn Sees Bid War for Texaco If He Wins Proxy
Investor Carl C. Icahn predicted that if he wins his proxy battle against Texaco Inc. new offers for the company would materialize, topping his own $60-a-share bid.
In a meeting with securities analysts and shareholders Thursday, Icahn attempted to convince some skeptics that his intentions really are to acquire the company himself. But he said, “I believe the company is cheap at $60 (per share).” He said that if he and four associates win election to Texaco’s board and his friendly takeover proposal is put to a vote by shareholders, “other people would come and make offers and we’d have an auction.”
The ostensible purpose of the meeting was to provide evidence that Icahn really can come up with the $14.2 billion in financing he estimates will be needed to carry out his offer. He said $12.4 billion would be needed to buy the shares he doesn’t own, $300 million to convert debt and $1.5 billion to be placed in escrow for tax liabilities.
But the takeover specialist glossed quickly over the numbers and instead gave what amounted to a campaign speech designed to persuade shareholders that they had nothing to lose and much to gain by siding with him in the proxy fight.
At the same time, Icahn confirmed that if he loses the proxy contest, he probably will selloff his current 14.8% stake in Texaco. Such a move could cause a sharp drop in the price of Texaco’s stock. Before Icahn’s presentation, which was made after the New York Stock Exchange closed, Royal Dutch/Shell denied that it was considering a friendly takeover and Texaco stock fell $1.75 to close at $50.625.
In figures distributed at the meeting, Icahn disclosed that he would need to borrow $8.86 billion from banks to carry out the offer. As expected, the rest would be financed from the sale of various assets, including Texaco’s share of Texaco Canada Inc. and assets of Caltex Petroleum Corp., Texaco’s joint venture with Chevron Corp. in eastern Asia.
He said he has received “preliminary indications” from a major bank that syndicated loans would be available to meet the borrowing needs, although he said he hasn’t been given formal approval. He declined to identify the bank.
Several respected securities analysts said they doubted that the numbers or Icahn’s speech would have much immediate impact on the proxy fight or the price of Texaco’s stock. “I really don’t think it’s going to change a lot of people’s minds,” said William H. Brown III, an oil industry analyst at Kidder, Peabody & Co..
Texaco’s stock has continued to trade well below Icahn’s $60-a-share offering price, reflecting not only some doubt about his ability to raise the financing but also his chances of winning the proxy fight. Even if he wins, some analysts noted, he’ll have only a minority on the board and it isn’t certain that he’d be able to get the offer placed before shareholders.
In a statement after the meeting, Texaco denounced Icahn’s financing figures as “sketchy, sloppy and wrong.” The company said a $60-a-share acquisition would cost $20 billion, not the $14.2 billion Icahn estimates.
The proxy fight is scheduled to be decided at Texaco’s annual meeting June 17. Icahn and four associates are seeking seats on the company’s 14-member board, including the one held by Texaco’s president and chief executive, James W. Kinnear.
Icahn said Thursday he expects to win the fight but expressed less than absolute certainty. “It’s not one of these shoo-in things,” he said.
The meeting, attended by about 200 analysts and shareholders, was held in a hotel ballroom festooned with billboards saying “The real issue: Your right to vote for $60” and others noting that Icahn has pledged to forfeit $100 million in earnest money he has promised as a guarantee that he can obtain the financing.
In a jaunty and confident presentation filled with jokes, Icahn was scathing in his characterization of Texaco’s current management, which he described as plodding and unable to successfully restructure the company.
