NEW YORK, NOV. 27 -- Texaco Inc. and Pennzoil Co. for the first time in months have resumed negotiations over settlement of their multibillion-dollar legal battle, as Texaco faces potential pressure from its new major shareholder and in its bankruptcy reorganization, according to published reports.
James W. Kinnear, Texaco's chief executive officer, met Tuesday with J. Hugh Liedtke, Pennzoil's chairman, and they could meet again as early as next week, according to an unnamed source quoted by the Wall Street Journal in today's editions.
Charles Luce, chairman of the general creditors' committee in Texaco's bankruptcy proceedings, said Texaco and Pennzoil again were in "direct negotiations" on an out-of-court settlement, according to the source, who the Journal said was familiar with the companies.
Texaco is appealing a Texas state court jury's order that it pay $10.35 billion in damages to Pennzoil for wrongly interfering in Pennzoil's attempted merger with Getty Oil Co. in 1984. The state supreme court refused to hear the appeal, and Texaco is seeking a U.S. Supreme Court review of the case.
Texaco in April filed for Chapter 11 bankruptcy court protection from creditors to void a state requirement that it post a potentially ruinous $12 billion security bond to appeal the judgment.
The two companies broke off direct negotiations when Texaco filed for Chapter 11 protection.
Pennzoil recently proposed that if Texaco paid it a nonrefundable $1.5 billion it would place a $5 billion cap on Texaco's total liability in the case. Texaco officials have rejected the notion of a nonrefundable payment, while characterizing the idea of a cap as worthy of discussion.
The resumption of direct negotiations comes as Texaco gains a major new shareholder in Carl Icahn, the chairman of Trans World Airlines.
Australian investor Robert Holmes a Court announced Wednesday he would sell 12 million Texaco shares he controls to Icahn, and give him voting rights over 12 million more. Combined with the 5.9 million shares TWA already holds, the deal would give Icahn control of about 12.3 percent of Texaco's 243 million shares outstanding, making him the oil giant's biggest shareholder.
Icahn has not disclosed his motive for acquiring the shares. However, analysts speculate that as Texaco's major shareholder Icahn might actively push Texaco to reach a settlement with Pennzoil, which could sharply boost the value of his shares.