Texaco Courts Its Holders, Pledges $1.6-Billion Payout
The management at Texaco Inc., battling investor Carl C. Icahn for shareholder support, promised Tuesday to give its stockholders $1.66 billion, or a third of the $5 billion that it expects to raise from asset sales as part of a restructuring.
Icahn, who owns 14.8% of Texaco, is seeking to install five directors on the 14-member board during elections at the June 17 annual meeting. If shareholders elect Icahn and the rest of his slate, Icahn is expected to try to force the new board to allow shareholders to make the final decision on his $12.4-billion, or $60-a-share, bid for Texaco. Management previously rejected his offer.
By pledging $1.66 billion in value shortly before the annual shareholders meeting, Texaco’s management is trying to circumvent Icahn’s appeals, analysts said.
One Way to Say Thanks
“The motive is to make sure they win the proxy fight and to ensure that the shareholders don’t vote for Icahn,” said Jack Aydin, an analyst at McDonald & Co. “I’m sure it will influence the proxy fight somehow. . . . Timing-wise, it’s a good move by management. You have to question whether management would do this if Icahn wasn’t there.”
Rosario Ilacqua, a Nikko Securities analyst, said: “Texaco is courting stockholders, and Icahn is courting stockholders. This is one way for Texaco management to repay stockholders for the pain of going through bankruptcy. . . . It’s in the line of selling assets to enhance shareholder value.”
Texaco emerged from bankruptcy last month after agreeing to settle a $10.3-billion judgment against it by paying Pennzoil Co. $3 billion. A jury had ruled that Texaco interfered with Pennzoil’s 1984 attempt to acquire part of Getty Oil Co. Icahn began pressuring Texaco’s management at that time to increase the value of its stock.
On Tuesday, Icahn said: “The truth is, management is trying to buy time with a plan that won’t sell. Their time is up--stockholders want the right to vote for $60. . . . It’s too late for vague promises.”
Texaco stock closed up 12.5 cents at $51 Tuesday.
In Texaco’s most recent sale of assets, West Germany’s largest power company, Rheinisch-Westfaelisches Elektrizitaetswerk AG, agreed Monday to buy Texaco’s German operations for $1.2 billion.
Texaco said in a statement Tuesday that it was also willing to consider selling Texaco Canada, its 78% owned Canadian subsidiary. On the current market, Texaco could raise $2.7 billion by selling its share of the subsidiary, according to analysts. Ilacqua noted that Icahn has suggested that the subsidiary could be sold.
“The company is saying, ‘We can do the same thing. You don’t need Icahn,’ ” said Ilacqua. “This is a lot of posturing.”
However, Texaco spokesman Peter Maneri said sale of assets and plans for boosting stock value were made early this year--before Icahn launched his bid.
“It could wind up swinging some votes,” Maneri said, “but we announced on Jan. 9 a major restructuring and we mentioned, at that point, the possibility of a share buyback. . . .The company has stayed its course. The company has said it would do this, and it’s doing it.”
