Occidental Petroleum Corp. Chairman Armand Hammer said he has no plans to revive his abortive attempt to merge with Diamond Shamrock Corp., and labeled as unfair Diamond Shamrock's complaints about Occidental's management in the wake of the failed merger attempt.
"It's dead," he said of the merger in an interview. "There's an old saying, 'Don't disturb the dead.' " Oxy and Diamond Shamrock parted ways last week after a whirlwind courtship in which they agreed to a merger in the morning and broke off negotiations by the end of the day.
Diamond Shamrock Chairman William H. Bricker has said that his company's board backed out of the merger because it was "particularly concerned that the combined company would lack the broad management strength to make the merger successful."
Hammer, however, said, "I don't think that's valid." He said the merged companies' management would likely have included 17 top Diamond Shamrock executives Occidental had agreed to accept.
"We prepared a release that was to be issued the morning of the approval of both boards," Hammer said. "That release was agreed upon Sunday by Mr. Bricker and myself, and there is nothing said in that release about management."
Hammer, who is 86, said there was no suggestion that Bricker would be given a chance to succeed him as Occidental's chairman, and confirmed Bricker's statements that Bricker was willing to step away from the combined company -- with a "golden parachute" of several million dollars. Hammer suggested that the high cost of paying that severance bonus may have been a factor in the Diamond Shamrock board's reluctance to approve the merger with Occidental.
Hammer said the Diamond Shamrock negotiations, which were being handled by Oxy President Ray Irani, a former Diamond Shamrock official, were initiated by Bricker. "He came to us, you must remember, we didn't come to him," Hammer said.
According to Hammer, Bricker was worried that Diamond Shamrock might be the target of a hostile takeover offer, so he wanted to enlist Occidental as a potential "white knight" that would make a competing offer. "I told him we didn't want to be involved in any hostile takeover, even as a white knight, and since he said under those circumstances he was willing to step out and turn the company over to us, I said, 'Why not make a merger now?' " Hammer said. "That was how we got into a discussion. He said, 'All right, I'm ready.' "
Although Wall Street analysts said the proposed price of the deal -- a one-for-one exchange of stock -- was too high, Hammer defended it. "It was a high price, it's true, one-for-one -- much higher than I was willing to pay and started by offering , but sometimes you have to pay a substantial premium to make an acquisition," he said. He also cited a study prepared for Occidental that most recent oil takeovers have been at a price about 50 percent higher than the acquired company's market value.
Hammer said he was attracted to Diamond Shamrock as a merger partner for Oxy because of its Indonesian oil interests, chemical operations and coal holdings. "I thought that there was quite a synergy between the two companies," he said.