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Icahn Ups Texaco Stake

December 22, 1987

NEW YORK (AP) _ Financier Carl Icahn has bought another large stake in Texaco Inc., leaving him in control of 12.3 percent of Texaco’s outstanding shares and once again raising questions about his intentions for the company.

Trans World Airlines Inc. said Monday it had joined with ACF Industries Inc. to buy the remainder of a 24 million-share block owned by Australian financier Robert Holmes a Court for $37 a share, or $447.5 million.

Icahn, who controls TWA and ACF, acquired voting control over the entire block last month when he bought half of Holmes a Court’s Texaco holding for $29 a share, or $348 million.

But under the terms of the first deal, Icahn would have lost the voting rights to the remaining shares by turning down Holmes a Court’s offer to sell him the rest of the block.

Icahn also controls 5.8 million Texaco shares that TWA bought on the open market for $193.2 million, or an average of more than $33 a share.

The latest purchase came as Wall Street reacted to Texaco’s weekend settlement of its multibillion-dollar legal dispute with Pennzoil Co. by sending the stocks of both companies lower. Texaco closed at $37.50 a share, down $1, and Pennzoil was down $1.87 1/2 , at $77.50 per share in New York Stock Exchange composite trading.

Analysts speculated that Icahn’s latest move was another way of putting heat on Texaco’s management, either to take steps to raise the company’s share price or risk a takeover attempt. But whether he could succeed was another matter, some said.

Last week, Icahn declared he had no interest forcing management’s hand, although he is seeking permission to increase his Texaco stake to more than 25 percent.

Icahn was unavailable for comment Monday, a secretary said.

Texaco on Monday filed a reorganization plan to emerge from federal bankruptcy protection from creditors.

Texaco had filed for bankruptcy protection in April rather than post a ruinous security bond needed to pursue appeals of the jury verdict that it had wrongly interfered with Pennzoil’s 1984 attempt to acquire part of Getty Oil.

Under the plan announced Saturday, Texaco would pay Pennzoil $3 billion and Pennzoil would drop the $10.3 billion damage judgment it won from the Texas jury against the White Plains, N.Y.-based oil company.

The restructuring also would streamline Texaco, help finance the $3 billion payment to Pennzoil and attempt to increase Texaco shareholder value.

Texaco President James W. Kinnear said Saturday that some asset sales would occur as the company restructured its operations under the reorganization.

Analysts generally agree it would take major asset sales to move Texaco’s stock much higher than about $40 a share.

Although Texaco must come up with the money to pay for the reorganization, analysts said they were not sure how much of a restructuring the company really had in mind - nor whether Icahn could marshal the resources to force a real breakup.

Bruce Lazier, an analyst at the Prescott, Ball & Turben Inc. securities firm, said Wall Street and Icahn would love Texaco to sell its 50 percent interest in the Caltex group of companies in Asia, as well as its European operations and 78 percent stake in Texaco Canada.

Although the holdings are worth at least $5 billion together, Lazier said he did not think Texaco’s management would think it prudent to ″raise cash, pay Pennzoil, roll over debt and buy in shares until the cows come home.″

Such asset sales would be at a poor time, compared with two or three years from now when oil prices likely will be higher, Lazier said.

In addition, ″no matter what you believe, there’s nothing but underlying animosity and paranoia by Texaco management for Icahn,″ he said. Thus, Icahn would find it difficult to get what he wants out of the Texaco leaders, who are still protected by anti-takeover provisions in the company’s charter.

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