Pennzoil to Boost Its Stake in Edgy Chevron

Pennzoil Co., which already owns 8.8% of Chevron Corp., said Monday that it intends to boost its stake to just under 10%, the level at which Chevron’s new “poison pill” takeover defense would be triggered.

But Houston-based Pennzoil reiterated that its interest in Chevron is as a passive investment intended to defer taxes on the $2.6-billion net proceeds that it received from Texaco Inc. in 1988 to settle the fight for Getty Oil Co.

“We continue to believe that Chevron has the potential to be an attractive long-term investment for Pennzoil,” wrote Pennzoil Chairman J. Hugh Liedtke and President and Chief Executive James L. Pate in a joint letter to shareholders Monday.

In December, Pennzoil disclosed that it had spent $2.12 billion of the settlement to amass a sizable stake in Chevron. Pennzoil at that time left open the possibility of investing the remaining $480 million in Chevron shares as well.

Pennzoil’s disclosure Monday--contained in a filing with the Securities and Exchange Commission and the letter to shareholders--made good on that. Pennzoil also filed with the Federal Trade Commission for permission to make the purchases under the Hart-Scott-Rodino Antitrust Act.

“In order to maximize the potential tax-deferral benefits of our investment, it is desirable for Pennzoil to invest up to the full $2.6 billion of net proceeds from the Texaco settlement prior to the end of 1990,” Liedtke and Pate wrote to shareholders.

In an amended Schedule 13-D filed with the SEC, Pennzoil said it will buy up to 3,929,252 Chevron shares to be added to the 31,524,500 it already owns. The purchases will be made sometime between the middle of August and the end of the year, depending on market conditions.

At Chevron’s closing price of $74.875 Monday, the additional shares would cost about $294.2 million.