WHITE PLAINS, N.Y., JAN. 20 -- Trans World Airlines Inc. Chairman Carl C. Icahn testified today that he will "without question" vote against Texaco Inc.'s historic bankruptcy settlement plan unless a federal judge allows Icahn to submit his own plan to Texaco's shareholders.
Because Icahn controls about 15 percent of Texaco's stock, valued at more than $1 billion, and because two-thirds approval by Texaco's shareholders is required before any bankruptcy plan is accepted, Icahn's opposition could scuttle the proposed settlement of Texaco's $10.3 billion legal dispute with Pennzoil Co.
But lawyers for Texaco and Pennzoil urged that Icahn's threat be ignored and suggested that the TWA chairman would change his mind about the proposed settlement when actually forced to cast his ballot.
Icahn also disclosed today that he met recently with Armand Hammer, chairman of Occidential Petroleum Corp., to discuss a possible acquisition of Texaco. The meeting followed a conversation between Icahn and Texaco chief executive James Kinnear in which Kinnear suggested he would entertain a takeover offer of $60 per share, Icahn said.
Icahn went on to testify, however, that Kinnear later told him he "never really meant" that he would consider a takeover offer at $60 per share or any other price.
Texaco stock rose 25 cents to $38 a share on the New York Stock Exchange today. Pennzoil lost $1.50 to $63.375 a share.
Kinnear issued a statement today calling Icahn's recollection of their conversation a "flat out fabrication." Kinnear said that a sale of Texaco would not be in the best interests of shareholders at the present time.
As part of a proposed bankruptcy reorganization designed to end their legal battle, Texaco agreed in December to pay Pennzoil $3 billion in cash if their settlement is approved. Texaco sought bankruptcy protection last April, citing financial pressures caused by the Pennzoil lawsuit that arose from a disputed 1984 merger contract.
Icahn has asked Judge Howard Schwartzberg, who oversees Texaco's bankruptcy proceedings, to allow shareholders to consider a bankruptcy plan nearly identical to Texaco's, except that it would remove many of Texaco's takeover defenses. Pennzoil, Texaco and committees representing Texaco's creditors and shareholders opposed Icahn's request at a daylong hearing today.
Schwartzberg said he expected to issue a ruling on Icahn's motion within several days.
While Icahn had earlier indicated dissatisfaction with Texaco's proposed settlement, his testimony today represented a new and forceful commitment by the maverick investor to pursue changes in Texaco's corporate charter, even if his efforts unravel Texaco's deal with Pennzoil.
Icahn testified that without his support, he was confident the proposed bankruptcy settlement would fail to win approval from two-thirds of Texaco's shareholders. He said if the settlement was turned down, he hoped to quickly submit a new plan to shareholders that would strip away Texaco's defenses against a hostile takeover.
In any event, Icahn testified, he was prepared to let Texaco abandon the settlement with Pennzoil and fight its lawsuit before the U.S. Supreme Court. "Dave Boies over there tells me we have a very good chance," Icahn said, pointing to Boies, Texaco's chief legal strategist.
"We're never going to give them $11 billion," Icahn said, referring to the approximate amount Texaco would owe Pennzoil if it lost its appeal. Icahn said that even if Texaco failed before the Supreme Court, it would be years before Pennzoil collected any portion of its huge judgment.
Despite Icahn's threat to vote against the proposed settlement, lawyers for Texaco and Pennzoil urged Schwartzberg to put their settlement plan to a vote. They suggested Icahn might change his mind about the bankruptcy reorganization once confronted with a do-or-die decision about the existing Pennzoil deal.
Both sides are fighting the clock because of the timetable governing Texaco's appeal to the U.S. Supreme Court. Though Justice Byron White recently granted Texaco an extention of the time during which it may seek high court review of the Pennzoil case, Texaco may be forced to file a petition as early as April to preserve its legal right to appeal.
In addition, Texaco's settlement agreement with Pennzoil provides that Pennzoil must receive its $3 billion in cash by mid-April or else the deal is void.
A Pennzoil attorney told Schwartzberg today that the company was concerned that Icahn's efforts could prolong Texaco's bankruptcy proceeding past that April deadline.