Texaco Claiming Victory but Icahn Won’t Concede
Texaco’s management claimed a decisive victory Friday in its fight against corporate raider Carl C. Icahn’s efforts to take control of the company in the biggest proxy battle in corporate history.
If true, Texaco’s management has won a reprieve to continue restructuring the company in the wake of its recent bankruptcy proceedings. It also likely would mean an end to Icahn’s efforts to oust management and acquire the nation’s third-largest oil company.
The exact results of the vote may not be known for weeks, and some securities analysts say they doubt management could know the outcome so quickly.
But after Texaco’s annual meeting ended Friday, Chief Executive James W. Kinnear said: “We think we have a substantial win.” He said the company’s proxy solicitors told him that votes counted so far show that management’s slate for Texaco’s board probably was elected by a “substantial” margin. Icahn and four allies had sought seats on the board.
Texaco Stock Drops
Icahn said he didn’t know the outcome, but insisted that he had a good chance of winning, depending on how one crucial block of stock had been voted. In a news conference after the meeting, Kinnear and Chairman Alfred C. DeCrane Jr. declined to give any specific estimate of the vote. Texaco has 243 million shares outstanding, in the hands of more than 200,000 shareholders.
Texaco’s stock dropped after management claimed victory. It closed at $48, down $1.50. Icahn’s friendly offer to acquire the company at $60 a share was contingent on winning the proxy fight.
The long, costly fight ended when voting was closed more than two hours into the annual meeting. Most votes had been cast before the meeting, however, and although there were sharp exchanges between Texaco management and Icahn during the meeting, the drama probably had no impact on the outcome.
Texaco officials played to a heavily pro-management crowd that at one point gave Kinnear a standing ovation. About 1,400 shareholders showed up, filling the Westin Hotel’s main ballroom and spilling over into conference rooms equipped with video monitors.
Many were retired Texaco employees or long-time loyal shareholders, including some who said they came long distances at Texaco’s urging.
Stuck to Themes
Several stood and accused Icahn of planning to dismantle the company. “I think if we were to turn this company over to Mr. Icahn it would be like giving your Stradivarius to a gorilla,” said Bill Lenz, a retired Texaco employee from Connecticut.
Icahn had launched the proxy fight after management refused to put his $60-a-share offer before shareholders.
Although hoarse from weeks of speeches, interviews, and depositions in a related legal battle with Texaco, Icahn on Friday hammered away at themes he repeated throughout his campaign. He blamed management for the legal problems that led to Texaco paying a $3-billion settlement to Pennzoil.
And he accused management of being inept and unable to increase the company’s value for shareholders. He also claimed that his campaign wasn’t mainly for personal gain, but to help save corporate America from a system he described as “survival of the unfittest” in management.
After a series of mainly hostile remarks from shareholders, however, Icahn acknowledged that most of the crowd was against him. “Now I know why they give three points for the home-court advantage,” he said.
When DeCrane tried to hold Icahn’s remarks to the 10-minute limit, Icahn said: “Perhaps this is a manifestation of the inflexibility that has caused Texaco the problems we have today.” Icahn was allowed to continue.
In a news conference after the meeting, Icahn said he didn’t know what had happened to a 7.7-million block of stock that changed hands on Tuesday. The block was widely believed to have been either sold or purchased by the New York investment concern Kohlberg Kravis Roberts & Co. KKR owned 4.9% of Texaco’s stock.
Icahn said he thought that if the block was voted with him, or not voted, then he would win. But he said, “If KKR goes against us, I can tell you we definitely lost.”
Could Drop Further
KKR has refused to make any comment about its Texaco holdings. In a Texaco news conference, Kinnear asserted that the outcome hadn’t hinged on any single block of stock.
If management has won, Texaco’s stock probably will drop further, securities analysts said Friday. William H. Brown III of Kidder, Peabody & Co. said he expects the stock would level off at $42 or $43 per share, assuming that Icahn carries out his threat to sell off his 14.8% stake in the company.
Despite Icahn’s denials, however, Brown said he thinks that there is some possibility that Icahn would at least temporarily hang on to his shares and formulate a plan that would allow him to get more for his shares than if he were to dump them on the market or sell them through a private offering.
If he keeps the stock, Icahn would remain Texaco’s largest shareholder.
For his part, Kinnear said Texaco doesn’t intend to buy back Icahn’s stake. “This is not in the plan that we’re looking at,” he said.
Laborious Task
Kinnear said management can now turn its attention from the fight with Icahn. “This gives us a great mandate to go out and get back to the business of running an oil company.”
Proxy votes were being counted by an independent firm agreed on by Icahn and Texaco’s management. Getting an exact count is expected to be laborious because shareholders were allowed to submit multiple proxies and change their votes right up until the close of voting.
Proxy solicitors for both sides said the fight was the biggest and costliest proxy contest ever, although both sides refused to disclose how much they’ve spent on the campaign. Individual shareholders have complained of being inundated with telephone calls, mail and telegrams in the weeks before Friday’s meeting.
Icahn, for his part, predicted that if he lost, it would demonstrate that proxy fights are too costly and nearly impossible for dissident shareholders to win. “I think this is going to be one of the last great proxy fights,” he said.
