Pickens' Charge

First skirmish in the Gulf war

In the civil war among the shareholders of Gulf Oil, the leaders of the opposing camps both speak with Southern accents, but there the similarities end. The challenger, Chairman T. Boone Pickens Jr., 55, of Mesa Petroleum in Amarillo, is a dashing, salty Texas oilman who delights in telling earthy jokes. The defender, Gulf Chairman James E. Lee, 61, is a bald, straitlaced native of Mississippi who sometimes leads prayers before gatherings of his board of directors. While Lee has spent his whole career plodding through Gulfs corporate ranks, Pickens is a free-spirited dealmaker whose company has bought and sold stakes in three other oil firms in the past two years, earning more than $100 million along the way. At a special meeting of Gulf shareholders last week, the two men squared off for the first skirmish in what may be a long struggle.

Pickens provoked the confrontation in October, when he and a band of partners announced that they were buying Gulf stock. So far, they have spent $850 million for more than 12% of the company's shares. Pickens planned to lead a drive that would force Gulf to transfer ownership of some 50% of the company's U.S. oil and gas reserves to the shareholders in the form of a royalty trust. Such a move, he contended, would boost the market value of Gulf shares, now priced at about $45, by as much as 45%.

Nonsense, said Gulfs management, which argued that a royalty trust would increase individual stockholders' tax liabilities and could even depress the market value of the shares. Warned Chairman Lee: "[The Pickens group] is out to gut this corporation."

Pickens was content to wait for Gulfs annual shareholders' meeting in May to push the trust plan, but Lee decided to beat the Texan to the draw. The Gulf chairman devised a strategy to reincorporate the Pittsburgh-based company in Delaware, instead of Pennsylvania. Under Delaware law, Pickens would have to muster a majority of stockholder votes to gain a seat on the Gulf board or to force any structural changes in the company. Pennsylvania rules would allow the Pickens group, with its 12%-plus voting bloc, to grab a spot on the 13-member Gulf board.

Lee called a special shareholders' session to vote on the reincorporation plan, and Pickens quickly denounced the scheme. Campaigning almost like presidential candidates, the two antagonists crisscrossed the U.S. to woo shareholders, particularly the big institutional investors that control a third of Gulf's stock. Money managers would see Pickens coming around one day and Lee the next. The two sides courted individual investors with full-page newspaper ads, topped by big headlines like YOUR CHOICE, YOUR VOICE, YOUR VOTE.

Some 3,000 Gulf shareholders gathered at Pittsburgh's new convention center for the showdown vote last week, and many thousands more sent in their ballots by proxy. Before the meeting, Pickens greeted Lee with a handshake and a smile, but when the session started, the talk was tough. In a speech, Lee ridiculed Pickens' royalty-trust plan as "silly." From the floor, Pickens responded that Gulf needed "fresh ideas."

The ballot count will not be finished for perhaps three weeks, but both sides were confident. "There's going to be a big vote against management," said Pickens. The Texan hinted that even if he fell a bit short in this vote, he would marshal his forces for another charge at Gulfs regular meeting in May. qed This file is automatically generated by a robot program, so viewer discretion is required.