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Texaco’s Stock Rises On Word Of Pickens Interest

February 19, 1988

NEW YORK (AP) _ Wall Street sent Texaco Inc’s stock higher Friday following word that T. Boone Pickens was seeking permission to buy at least 15 percent of the beleaguered oil giant, a stake similar to that already held by fellow corporate raider Carl C. Icahn.

Texaco, which has been reorganizing itself as it prepares to emerge from Chapter 11 bankruptcy protection, has been fighting efforts by Icahn - its largest shareholder - to strip the company of its anti-takeover defenses.

Company officials have feared that Icahn or another raider would try to take the company over and sell its assets to boost the value of their stock.

The arrival of Pickens on the scene only heightened speculation that such a attempt may well be in the works.

In nationwide trading of New York Stock Exchange-listed issues, Texaco’s stock closed Friday at $42.62 1/2 per share, up $1.87 1/2 .

Texaco spokesman K. Peter Maneri said the company learned of Pickens’ action in a Tuesday letter saying Mesa Limited Partnership, an oil and gas concern controlled by Pickens, had told the Federal Trade Commission that it wanted to buy more than $15 million worth of Texaco’s stock.

If neither the FTC nor the Justice Department objects, Pickens would be free to acquire up to 15 percent of Texaco’s outstanding shares. Mesa also asked the government for an speedy review of its request, which would cut 15 days off the required 30-day waiting time.

Speaking to reporters Friday, Texaco president James W. Kinnear said he had ″no idea″ what Pickens’ intentions were, and that the company was capable of warding off any threatening moves by Pickens or Icahn.

″I think we have appropriate bylaws and charter provisions to make sure our shareholders’ wealth is protected,″ he said.

Icahn, who controls at least 14.8 percent of Texaco’s 243 million shares, has said he would seek to install himself and four associates on the company’s board of directors, and has been pressing the nation’s third-largest oil company to remove anti-takeover provisions contained in its charter.

Pickens told the New York Times Thursday that he would support Icahn in that effort. Andrew Craig, a spokesman for Pickens, said Friday there would be no comment on Mesa’s Texaco filing.

Pickens and Icahn are well known in the oil patch.

In 1984, Mesa picked up $213 million after a run Pickens made on Gulf Oil Co. led to its sale to Chevron Corp. Mesa then offered $9.3 billion for Phillips Petroleum Co., only to accept a $80 million profit when Phillips bought the shares back in 1985.

Soon afterward, Icahn led a group of investors with an $8.1 billion bid for Phillips that led to another stock buyback and a $50 million profit for Icahn.

Several analysts suggested Friday that Icahn and Pickens could profit by making simultaneous attacks on Texaco, even if they do not cooperate directly.

Gary E. Hindes, chairman of Delaware Bay Co., an investment firm, said he believed the two are working together - if only by ″a wink and a nod″ - and that they would attempt to take control of Texaco’s board of directors.

″This is a major play under way,″ said George J. Gaspar, an analyst with the Milwaukee investment firm of Robert W. Baird & Co. Inc.

″I don’t know what Mr. Pickens is trying to prove. I think Texaco is bigger than Icahn and Pickens together,″ he said. ″This may be a prelude to a larger plan.″

″You’ve got serious problems with exploration and production (of oil) in the U.S. So obviously Icahn is going to try to exploit that. And Pickens is just going to ride along.″

″Other oil companies would be happy to carve into some of Texaco’s assets,″ he observed.

In fact, Texaco has already announced its intention to sell off some assets while selling partial shares of others to third parties in an effort to raise at least $3 billion after it emerges from bankruptcy.

Targeted assets reportedly include several refineries and some oil reserves that are no longer profitable.

Not included are Texaco Canada Inc. and Texaco’s half-share in P.T. Caltex Pacific Indonesia - big money-makers that would be juicy targets to a raider.

On Thursday, it was reported that Texaco and Saudi Arabia were negotiating a $1 billion deal whereby Texaco would sell a half interest in two gulf coast refineries to the Saudis.

On Friday, Kinnear declined to discuss that report, saying he did not want to ″negotiate in a fishbowl.″

Texaco sought Chapter 11 bankruptcy protection last April to avoid having to post a potentially ruinous bond while appealing a $10.3 billion judgment held against the company by Pennzoil Co.

A Houston jury awarded the judgment to Pennzoil after ruling that Texaco had improperly interfered with a Pennzoil plan to acquire part of Getty Oil Co. - and acquired Getty itself.

As part of its proposed reorganization plan, Texaco agreed to settle the case by paying Pennzoil $3 billion in cash. It hopes to emerge from bankruptcy protection in April.

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