T. Boone Pickens Jr. yesterday denied that his bid to buy Phillips Petroleum was nothing more than corporate "greenmail."

Pickens and his partners, who agreed to drop their bid for Phillips late Sunday night, will earn an $89 million profit on their investment in the company. Phillips stock rose approximately 20 percent between the time Pickens first announced the takeover bid Dec. 4 and the settlement Sunday.

"We certainly don't identify it as greenmail, because we negotiated substantially the same deal for the stockholders as we got for ourselves," Pickens said in a telephone interview yesterday from the Amarillo, Tex., headquarters of Mesa Petroleum Co., the company he heads.

Under a complicated and uniquely structured "recapitalization" plan that even had some securities analysts stumped upon first hearing of it yesterday, Phillips said it would swap debentures worth $53 a share for 38 percent of its outstanding common stock. The Pickens group's 5.7 percent stake in Phillips would be purchased for the same price in cash. Although the entire arrangement must be approved by Phillips' shareholders, the Pickens group's interest will be purchased by Phillips no matter how the shareholders vote.

Phillips' stock, which had soared from $35 a share in recent weeks amid speculation that the Pickens group or some other suitor would buy the company out, nosedived yesterday after the settlement was made public. The company's stock fell $9.62 a share to close at $45.25 on the New York Stock Exchange. Pickens' group had been offering $60 a share.

As part of the settlement, Phillips said it will also sell $2 billion worth of assets over the next year to make back some of the $3.1 billion in debt it will accumulate in the debenture swap. And a newly formed employe stock-ownership plan (ESOP) will buy about 50 million shares of Phillips, giving employes a 40 percent stake in the company.

In return, Pickens' group agreed that it would not buy any Phillips shares for the next 15 years.

"It strengthens our company, gives our shareholders greater value for their shares and it makes our employes shareholders," Phillips Chairman William C. Douce said of the agreement with Pickens in a telephone interview from the company's Bartlesville, Okla., headquarters. "Few things will motivate employes more than the knowledge that they own a piece of the company."

The agreement, drafted during a weekend of negotiations between representatives of Phillips and the Pickens group, which called itself Mesa Partners, ends a wild and woolly three-week battle for control of Phillips, the nation's ninth-largest oil company and 15th-largest company overall.

It represents something of a defeat for Pickens, who had sought to gain control of Phillips, the company at which he started in the oil business as a geologist in the 1950s. Pickens said yesterday he had hoped, once he took control of the company, to merge it with Mesa. His attempts were blunted by a tenacious defense from Phillips that surprised many oil industry analysts. Phillips at one point had court actions going against Pickens in three states, and even mobilized the citizens of Bartlesville into a "Boone Busters" campaign that won national attention.

It was not clear what prompted the two sides to come to an agreement, but Phillips initiated talks with Mesa on Friday hours after a Delaware court ruled against Phillips in a key suit. Pickens, who said he was trying to maximize profits for all shareholders, seemed hurt by the firestorm of criticism his actions stirred up in Bartlesville. "His image as Robin Hood is somewhat tarnished," said oil industry analyst Sanford Margoshes at Shearson Lehman American Express.

Margoshes also suggested that Pickens may have been worried that there were no other offers for Phillips that might have given him an escape hatch -- a Pickens-led group made $400 million earlier this year after driving Gulf Corp. into a record $13.2 billion merger with Chevron Corp. Or, Pickens might have gotten cold feet about the long-term oil industry outlook. "The growing uncertainty about the outlook for crude prices made Boone Pickens willing to take his profit when he could get it," Margoshes speculated.

Pickens nevertheless walks away from the abortive battle with a tidy profit for himself and the other Texas oilmen who made up Mesa Partners. Such profitable forays have been labeled as "greenmail" in other corporate episodes in which a raider is paid off to drop a takeover bid. Pickens, however, has said he opposes such tactics and will only allow himself to be bought out if a similar offer is made to all other shareholders.

This criterion seems to apply to the Phillips situation. Phillips officials said yesterday they believe the terms of the settlement will inflate the value of the company's shares by decreasing the number outstanding. The company currently has 154.6 million shares outstanding. Under its plan, it will purchase 58.8 million of those from shareholders in exchange for debentures with a principal value of $60 a share and an actual estimated value of $53 a share, according to the company. All shareholders will be required to participate in the debenture swap. "It's not quite a stock split, but it's not a tender offer," Douce said. "You have no choice, it's mandatory."

Following the recapitalization, Phillips will sell $2 billion in assets and make "significant revisions" in its capital-spending program and operating expenses in an effort to trim its debt. Douce would not detail what might be sold or where costs might be cut, but analysts have said Phillips appears to have at least $2 billion in attractive, readily saleable assets.

Phillips also will sell 32 million shares of unissued stock to a new employe stock-ownership plan for an estimated $1.6 billion. That will raise the company's outstanding shares to 127.8 million. Over the next year, the ESOP will purchase another 20 million or so shares of stock -- $1 billion worth in all -- in open market transactions, raising its total holdings to 52 million shares, or just over 40 percent of Phillips.

In raising the money for these purchases, the ESOP will apparently take advantage of a recent change in tax laws allowing lenders to ignore for tax purposes 50 percent of the money loaned to an ESOP for purchase of a company's stock. As a result, the ESOP would be able to borrow the money needed for the stock purchases at less than the prevailing rate of interest.

Pickens said he was satisfied, saying he was "surprised at the structure of it," but that it was along the lines of some of the things he has suggested for Phillips. "It was not tops on the list, but it was a case that we knew could happen. . . . The stockholders came out well, and the employes have an unusual opportunity, and the Bartlesville situation has been cleared up, so I think it's worked out fine," he said. "We wanted to run the company, but there was no way we were going to be able to run the company for a while. There were too many battles that still had to be fought."

The pursuit of Phillips ads another partial trophy for avid hunter Pickens' case. In recent years, he has made bids for Phillips, Gulf, Cities Services Co., Superior Oil Co., and General American Oil Co., each time falling short of gaining control and allowing himself to be bought out at a handsome profit. Many analysts believe that Pickens, who has a $4 billion cash war chest through Mesa, borrowed money and credit lines, will strike yet again at another major oil company before long.

Yesterday, however, he said he had more modest immediate plans. "We've got 11 children and grandchildren coming in," he said. "My plan is to get all my phone calls out of the way in the next two hours, have a press conference, and then go home for Christmas."