Pennzoil Co. Chairman J. Hugh Liedtke said yesterday there is currently "no reasonable likelihood" of an out-of-court settlement of his company's $11.1 billion judgment against Texaco Inc., and both sides prepared to return to court.
Liedtke called reporters to his Houston office yesterday after a second day in which speculation about a settlement of the Pennzoil-Texaco legal battle had caused violent swings in his company's stock price.
His comment appeared to end a round of negotiations that began late in December, after a Texas judge upheld the record judgment against Texaco in a breach-of-contract suit.
Pennzoil filed the suit after it lost out to Texaco in bidding for control of the Getty Oil Co. two years ago.
Liedtke blamed Texaco management for the breakdown of negotiations.
He accused them of dealing in bad faith, but did not provide any details of where the two sides had fallen apart.
Texaco Chairman John K. McKinley, responding to Liedtke's comments, said he was "surprised" at Pennzoil's characterization of the settlement discussions. "Texaco has dealt in good faith," and its proposals have been "sincere, realistic and substantive." The bargaining climate may have been worsened by yesterday's exchange featuring Liedtke's comments, which a Texaco spokesman said the company resented.
The Texaco offer that Pennzoil rejected Tuesday was "not anywhere close to what Wall Street was saying," Liedtke said.
"We're not going to make a cash merger deal with Texaco or anybody else," he said.
He called the Texaco offer "so bad it was embarrassing even to have called our directors and asked them to meet.
"We have come to the conclusion that there is no reasonable likelihood we will be able to work out a reasonable settlement with them so long as Texaco's current management can't bring themselves to deal with the reality that they have lost this lawsuit. We regret that. We've tried hard, we've tried to be cooperative."
Liedtke seemed to leave the door open to another try at negotiations, if Texaco alters its demands. "The honeymoon is over now. If they want to waltz, they've got a partner," Liedtke told reporters.
Texaco yesterday released a statement disclosing the existence of a confidentiality agreement between itself and Pennzoil -- the kind of agreement that permits two companies to share sensitive financial data in preparation of a merger.
It wasn't clear why Texaco revealed the agreement at this time. The agreement provides that for three years neither Texaco nor Pennzoil will attempt a hostile takeover of the other. However, there is no bar to a mutually-agreed-on merger.
At the same, Texaco resumed its legal struggle to fend off the $11.1 billion judgment imposed by a Texas jury and affirmed by Texas state Judge Solomon Casseb Jr. last month.
Texaco filed a motion with Casseb for a new trial and introduced new arguments before a federal judge in New York in support of its request for a restraining order that would block Pennzoil from filing claims against Texaco's assets.
If Judge Casseb denies Texaco's request for a new trial and Texaco appeals, it then presumably would have to post a bond covering the $11.1 billion judgment. In the absence of such a bond, Pennzoil could begin taking control of Texaco assets.
Texaco introduced statements from more experts in the New York court yesterday supporting its claim that it would be forced into bankruptcy if it has to post a bond. U.S. District Judge Charles Brieant will hear arguments from both sides today on Texaco's request for a restraining order, which is opposed by Pennzoil.