Hiding the Ball
Tuesday, May 11, en route to Boston
On the bright, crisp morning of May 11, promptly at ten o’clock, T. Boone Pickens, Jr., the founder, president, and chairman of the board of Mesa Petroleum Company, stepped aboard a private plane at Houston’s Hobby Airport. Under his arm was a thick folder stuffed with papers and documents, and behind him trailed an aide carrying several more folder bulging with papers. The plane, a sleep Falcon nine-seat jet, cream-colored with blue trim, was one of two corporate jets owned by Mesa Petroleum, and on this day it was carrying Boone Pickens to Boston, where he was scheduled to deliver an address to a convention of financial analysts.
The middle of May was not the best time for Pickens to have a speech on his agenda; he was excruciatingly busy. Two days before the trip, he had cut short a weekend at his ranch near Pampa to attend a late Sunday afternoon meeting at the offices of Baker & Botts, the giant Houston law firm that does most of Mesa’s legal work. The next day, he canceled the top management meeting that is usually held every Monday at Mesa’s Amarillo headquarters, so that he could continue the Baker & Botts sessions. After the Boston speech and a dinner given in his honor by Morgan Stanley, a New York investment bank house, he planned to fly immediately to New York for still more meetings that would last into the night and through most of Wednesday. If Pickens could have divined a way to avoid the Boston trip, he probably would have done so.
But if there were good reasons for ducking the convention, there was a better one for attending: it was the best way to keep America’s oil analysts from knowing what he was up to. His concern was easy to understand. Because what analysts do is largely predictive in nature – their ultimate goal is to forecast for the investment houses that employ them whether a stock will go up or down – they are always on that minute scrap of information that will give them an edge in predicting stock prices. As a result, analysts are, both by nature and by training, gossipmongers. And had Boone Pickens canceled his appearance at their convention, the rumors that had swirled around him for over a year would have gathered and swelled like a tornado. Every oil analyst in America would have had the same thought at the same moment: if Boon Pickens is so busy that he has to cancel his speech here, he must be planning something… he must be getting close to making a deal… he must be preparing to make a run at Cities Service Company! Which, of course, was exactly what Pickens was doing. Life in the oil business is a succession of deals, and if Pickens could pull this one off it would be the biggest and most daring deal of all. It would take him to the heady pinnacle of American finance, a strange, high-pressure world that has been seen up close by only a few hundred people. The rewards were potentially huge and so were the risks, and everybody would be watching to see if he stumbled.
When the Mesa jet had reached its cruising altitude, Pickens picked up a telephone that lay next to his armrest and called his office in Amarillo. “How’s the market today?” he asked.
Although Pickens has practically been canonized on Wall Street for his shrewd financial dealings, he gives an impression of ordinariness. He does not exude charisma. He favors unostentatious business suits and shuns accoutrements like flashy rings and cowboy boots. At 54, he is obviously in good physical condition, but no one would ever mistake him for a 35-year-old: the hair around his ears is graying, and his face is lined with the creases of his age. His jowls sag. From certain angles, he bears a striking resemblance to our most uncharismatic president, Jimmy Carter. Being a Republican of the hardrock variety, Pickens finds the comparison odious.
While the stock prices were being read to him, Pickens grabbed a piece of paper and began writing. “Mesa opened strong today,” he said and jotted down the number. 17 7/8. Then the Mesa Royalty Trust, a spin-off company he formed several years ago in a clever maneuver that gave stockholders ownership interest in several of Mesa’s oil properties: 27. He grunted approvingly. Then the opening stock quotations of the several independent oil companies he follows and the price of the cattle futures market, which he plays heavily. He wrote those down too.
After that conversation Pickens made a second call, this one to Alan Habacht, a partner in the New York investment firm of Weiss, Peck & Greer. Boone Pickens has always been an assiduous courter of the Alan Habachts of the world; even more than most chief executive officers, he wants to be on good terms with Wall Street. In Pickens’ mind, the courting has paid off: more than 50 per cent of Mesa’s stock is owned by institutional investors, a statistic that Pickens believes adds luster to his company’s reputation. Alan Habacht is among those on Wall Street who have known Pickens for years and think of him as a friend; more to the point, as an analyst for a firm that has controlled as must as 900,000 shares of Mesa stock, he is an important shareholder. Earlier that morning, Habacht had called Amarillo looking for Pickens, and now Pickens was returning the call.
“Hey, Alan, what’s going on?”
Habacht had one thing on his mind: Cities Service. What was Pickens doing? Was he going to make a move anytime soon?
It was no secret on Wall Street that Boone Pickens had long lusted after Cities Service, although at first glance it seemed an improbably dream. Cities was the 39 th-largest company in America and the 19 th-largest oil company; Mesa hadn’t yet cracked the Fortune 500. Cities had $6 billion in