Tenneco, Inc., the nation's 19th-largest energy company, announced plans yesterday to buy a big Texas insurance company.
Tenneco said it would give stock worth $750 million to acquire Southwestern Life Corp., a Dallas company with almost $10 billion of life insurance in force.
That purchase price is almost as much as Tenneco will spend this year an oil and gas producion.
Anticipating complaints that they were using their oil profits to diversify into other fields, Tenneco executives spent yesterday on Capitol Hill insisting the purchase would actually make more money available for energy development.
"We're not spending dollars, we're spending out company's securities," said Tenneco Executive Vice President G. H. Meason, who was in Washington to make the company's case. "The unexpected result of the purchase will be to make more money availbe for our announced policy of increasing exploration and production."
By issuing new stock, Meason explained, Tenneco will have greater assets against which it can borrow money for its energy operations.
That contention was greeted with skepticism by congressional sources, but there was no direct criticism of the proposed takeover.
Many of the large oil companies have used their energy revenues to buy up companies in the energy and other fields in recent years. The acquired firms have ranged from copper companies to department store chains.
The Senate Judiciary Committee recently approved legislation restricting the right of oil companies to buy other energy and non-energy companies of more than specified sizes.
Founded during World War II to build a natural gas pipeline from Texas to Tennessee, Tenneco already is one of the nation's most diversified energy companies and gets less than half its revenue from its oil and gas.
But the energy operations that accounted for only 46 percent of Tenneco's revenues last year brought in 69 percent of the company's $1.1 billion profits. Counting its chemical business, which is largely based on petroleum, Tenneco got 75 percent of its 1978 earnings from oil and gas sources.
Tenneco's non-energy businesses include the J. I. Case tractor company, the makes of Monroe shock absorbers and Walker mufflers, the Newport News Shipbuilding Co. in Virginia, Packaging Corporation of American, and another insurance firm, Philadelphia Life Insurance Co.
Tenneco has owned an interest in Philadelphia Life since 1952 and bought full ownership of the company last year. Philadelphia Life and Southwestern Life will continue to operate independently if the latest acquisition is completed, Tenneco said.
The complicated merger plan with Southwestern calls for a holder of one share of Southwestern stock to get 3/4 of a share of Tenneco common stock and 1/5 of a share of a new issue of nonvoting preference stock.
Tenneco said the price for taking over Southwestern amounts to $50 a share for the insurance company, whose stock was trading for $20 last January and hit $45 last week after reports of a takeover.
Southwestern Life's corporate headquarters is domiciled in Richmond, but the insurance company home officies and all the company's top executives are in Dallas.
Tenneco has been looking for an insurance company to buy for some time and approached Southwestern after hearing reports the company was interested in a merger, Meason said.
The Tenneco executive said the company will spend more than $800 million this year to increase its oil and gas production. In reports sent to key congressional leaders, Tenneco noted that its capital spending for energy has increased from $238 million to $861 million since 1973.
"We're one of the few oil companies our size -- there aren't any larger that have done it -- that has increased our oil and gas production," said Meason. Oil production is up 18 percent in the last five years and natural gas output increased 36 percent, he said.