Takeover strategist Carl C. Icahn is offering a record-breaking $13.64 billion for Texaco Inc., but the troubled oil mammoth says the proposal from its largest shareholder is a phony "bear hug" pressure ploy.
Icahn, who bought Trans World Airlines and has chased other big companies such as USX Corp., disclosed the $60-a-share offer late Wednesday in a letter to Texaco management.He publicized the offer shortly after Texaco management scrapped talks with him over how to restructure following its emergence from bankruptcy-court reorganization last month.
Icahn has amassed a 14.8 percent stake in the nation's third-largest oil company and has been seeking the most profitable way to exploit it.
Earlier this month, Icahn, who has said Texaco would be worth more broken up and sold, threatened a shareholder proxy fight to install five allies on its board. The company responded by suing him for alleged securities fraud.
They began peace talks about three weeks ago. Texaco President James Kinnear said the company terminated the discussions Wednesday because of what he called Icahn's unreasonable demands for special treatment in a restructuring.
"Texaco will not be bullied or cajoled into recommending to its shareholders a transaction that is not in their best interest or the best interest of the company," Kinnear said.
Icahn spokesman Daniel H. Burch said Texaco made a "totally inaccurate characterization of the negotiations."
"He at all times sought a restructuring that would treat all stockholders equally," Burch said. "We've now proposed a $60 cash merger that does treat all shareholders equally."
Of 243 million Texaco shares outstanding, Icahn owns about 36 million, for which he paid an average $34 each or about $1.22 billion. Combined with the $12.42 billion he offered to pay for the rest, the total offer is worth about $13.64 billion.
If completed, such an offer would be the biggest in corporate history. The previous record was the 1984 $13.4 billion acquisition of Gulf Corp. by Standard Oil Co. of California, now Chevron Corp.
Icahn said in his letter that he would drop the proxy contest if management would allow other stockholders to consider the offer. He gave management until 5 p.m. Friday to think it over.
He provided few other details but said part of his financing plan would include the sale of Texaco Canada Inc. and Caltex, two of Texaco's most prized assets.
"However, we intend to maintain Texaco's core business and return it to its rightful place as a leader in its industry, just as we have done with TWA," Icahn said.
Analysts have estimated the company would be worth between $60 and $80 a share if it was broken up.
Icahn's offer was the latest chapter in a troubled Texaco saga that began when smaller rival Pennzoil Co. won a $10.5 billion judgment against it in 1985, eventually driving Texaco into bankruptcy court 13 months ago as part of a strategy to save itself.
Texaco emerged from bankruptcy in April after settling with Pennzoil by paying it $3 billion and announcing a drastic restructuring plan that includes the sale of about $5 billion in assets.