“It’s Time To Make a Deal”
Take a trip inside a world you’ve never seen before – the billion-dollar world of a Wall Street merger – with an Amarillo oilman who’s staking a 25-year career on one wild roll of the dice.
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Pickens paused for a minute, listening to Koch’s reply, and then plunged back in again. “If you want to pick up a sweet deal, this is it. We have to do this quickly, though. If you are interested – and I strongly urge you to take several hours to look it over because it’s such a beautiful deal – I would like to show you the deal up here on Saturday morning.”
Koch was indeed interested. “Who’s working on this with you?” he asked.
“We’ve got Joe Flom at Skadden, Arps, and Bob Lovejoy over at Davis, Polk, and a whole covey of lawyers at Baker, Botts. Hell,” said Pickens, “I don’t even want to know what the lawyers’ bill is going to be.”
Koch said he would talk to his people and get back to Pickens.
“You won’t see a better stack of assets that you can get your hands on as cheaply,” said Pickens.
With that call, Pickens was in gear. He immediately dialed J. Hugh Liedtke’s number in Houston – Liedtke is the chief executive officer of Pennzoil. He wasn’t in. “Tell him to call Boone Pickens,” Pickens told Liedtke’s secretary. “Tell him he’s really gonna want to talk to me.”
He asked Bush to order him some soup for lunch and went back to the phones.
When room service arrived, Pickens took a few sips of his soup, but then he was back on the phone, talking to Stephen C. Mahood, a Sedco executive vice president. The speaker phone was on.
“I think you can double your money in six months,” said Pickens after explaining the deal.
Mahood was skeptical. “What happens if for some reason you can’t get from 51 per cent of Cities to 100 per cent because of legal hang-ups or whatever?”
“all our lawyers tell us that is really unlikely,” said James, “so what you’re really looking at is putting up money for preferred stock and, six to nine months later, getting properties on an attractive basis. The key thing to know is that you don’t put up your money until you know that 51 per cent is there, so it’s sitting there waiting to be grabbed.”
There was a long silence. “Who do you have in the deal with you right now?” Mahood asked finally.
“Well,” said Pickens, “we’re talking to a lot of people. Sid Bass just left here a little while ago.” Sid Bass, along with his father, Perry, had the largest private fortune in Fort Worth. “And there are some others. But if you have any interest, I would say come on up and we’re available to you this weekend. I’m not kidding you, this is a sweet deal.”
Another, even longer silence. “I’ll think it over and call you back.” But from the tone of his voice, he didn’t sound as though he would.
Pickens made six more phone calls in a row, either to prospective partners or to people whom he thought might have an entrée to prospective partners. Hugh Liedtke called back and Pickens gave him the pitch. Another man Pickens talked to thought he might be able to interest Burlington Northern in the deal.
When he’d finished his flurry of calls, he stood up, stretched, and grimaced. “Boy, do I have a headache.”
“Is there anything I can do?” asked Bush.
“Not unless you can order me a new head.” Pickens wandered off to the bathroom in search of aspirin, muttering to himself on the way, “Is there anything I’m leaving undone?”
In between all the meetings and phone calls to would-be partners, there was one essential thing Boone Pickens had to take care of: he had to get somebody to carry out Hamilton James’ scheme and tender for 10 per cent of Mesa. Otherwise Cities would be able to acquire Mesa before Mesa could acquire Cities. In midweek, Pickens had called on an old and trusted friend and asked him to be the ten-percenter. The friend was Tom Brown, the founder and president of Tom Brown, Inc., of Midland. Pickens knew that he was asking Brown to take a chance on his behalf. Tom Brown, Inc., had $217 million in revenues last year; for a company that size, $150 million was a substantial amount of money. Brown would have to borrow it. If Mesa succeeded in taking over Cities, Brown would make some money in the deal; and indeed, that would be his obvious incentive for getting in. But if the deal for some reason got hung up – in court, for instance – then Brown’s $150 million would get hung up too. Nevertheless, when Pickens called him, Brown tentatively agreed to be his ten-percenter.
Late on Friday, Pickens came back to the suite from a meeting to find that Tom Brown had called while he was out. Bob Lovejoy had taken the call, and he wasn’t happy. “Boone, what he wants to know is what happens if he has 10 per cent of Mesa and then Cities wins. I told him that we’ll figure out something. He’ll probably want a contract that spells out what we’ll do for him while we’re still running the board.”
“Can we do that?” asked Pickens.
“Well,” said Lovejoy, “that gets into a tricky situation. It starts to look like a self-tender. We just can’t have a tit for tat in this thing.”
“What it comes down to,” added Stillwell, “is that he’s just gonna have t take your word for it as a good oilman and a good friends.”
“Okay,” said Pickens, “let’s get him on the phone. I’ll talk to him.”
A moment later, Brown was on the other end of the line. “Hey, Boone,” he bellowed over the speaker, “what’s the timing on this thing?” Everyone in the room smiled. The ten-percenter was not going to be a problem.
The President Laughs
Tuesday, June 15, Houston
Boone Pickens stood at the podium at the Albert Thomas Convention Center in downtown Houston and eyed the crowd uneasily. These were his people out there – prosperous, conservative Texas Republicans who believed, as Pickens did, in the virtues of free enterprise, the evils of government regulations, and the need for Governor Bill Clements’ reelection. The convention center was a sea of dinner jackets and shimmering satin gowns. Ronald Reagan was there as the honored guest. Walter Mischer, the Houston developer who organized the dinner, had announced earlier that the event had raised over $3.5 million, more than any fundraiser in the history of the republic. That drew a round of applause. The previous record, he added, had been set four years ago when Bill Clements was first running for governor. Another round of applause. Pickens should have been delighted by the success of the dinner and by this audience of like-minded men and women, but instead, he looked as if he wanted to be someplace else. In a warm bed, for instance.
Pickens had come to Houston to be the master of ceremonies at the fundraiser. He is the state chairman of the Clements campaign and had committed himself to doing this months ago. But for the first time since the Cities deal had begun, he seemed worn down. His voice lacked its usual spark, and there were pronounced bags under his eyes. It had been a tiring weekend. Late Friday afternoon, while Pickens was in a meeting at Skadden, Arps, cities had done what everyone on Wall Street expected: it raised its hostile tender offer to $21a share. At last, the Cities offer was above the market price of Mesa stock. The move virtually guaranteed that Cities could buy over 50 per cent of Mesa, and that made finding new partners even harder.
The weekend had been spent in meetings with prospective partners. All day and well into the night the meetings had gone on, one piling up on top of another. There were so many people in town to hear about the deal that the Mesa players had split into two teams so two presentations could be made at the same time.
Despite the business allure of the deal – a chance to get oil in the ground at $5.50 a barrel doesn’t come along every day – finding partners was proving to be a difficult task. The main stumbling block was all the legal what-ifs. What if each side ended up with 51 per cent of the other? What if the deal got hung up in court? What if the ten-percenter was ruled out of bounds by a judge?
No matter how convincingly Stillwell and Lovejoy talked up Mesa’s legal prospects, each potential partner knew there was an element of risk in this deal that was completely outside his control. A deal like this, in which each side was tendering for the other, was not just unusual; it was terra incognita. There were no precedents to offer comfort. For prospective partners who were contemplating getting in on the play for nine-figure sums, that was very scary. One of the first people Pickens had talked to about the deal was Edward Hennessey, chief executive officer of the giant Allied Corporation. For several days Hennessey had seemed extremely interested, but then his interest had waned. Pickens believed that the legal risks were what finally cooled Allied off. He also knew for a fact that that was why Sid Bass had dropped out of the deal. “He said he didn’t want to risk $300 million on the possibility of them getting us before we get them,” he told Stillwell, after receiving word that they were out. Stillwell just shrugged.
On Monday, Pickens had left New York for the first time in two weeks and flown to Los Angeles to call on Armand Hammer of Occidental Petroleum; the time had come for the mountain to go to Muhammad. At that point, occidental was one of Pickens’ best prospects: the company badly wanted some domestic reserves to hedge its operations in volatile foreign countries, and Flom had successfully “sprinkled his holy water on the deal” in a weekend meeting with Hammer. Pickens met most of Monday with a battery of Occidental executives, including Hammer, and although the Doctor was very quiet during the meetings, Pickens was convinced that Occidental still wanted in on the deal. After spending the night in L.A., Pickens had flown to Houston for a Tuesday afternoon meeting with the Clements campaign staff and for the fundraiser. But his mind was already back in New York.
Pickens was seated on the dais next to Gerald Ford, and in the middle of dinner Pickens suddenly turned toward the former president and asked a question. “Mr. President,” said Pickens, “how could the Amax board have voted to turn down that offer from Socal? I’ve just never understood that at all.”
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