Texaco said Monday that it has entered negotiations with its largest shareholder, TWA Chairman Carl C. Icahn, and indicated that they are discussing a financial settlement that would remove Icahn from Texaco's picture.
In a brief statement issued late in the day, Texaco said it and Icahn are "engaged in discussions seeking to resolve their differences without continuing a proxy contest." A battle for five board seats has been expected at the firm's June 7 shareholder meeting.
The nature of the talks wasn't clear, but Texaco indicated it won't pay "greenmail" to buy out Icahn's nearly 15% share in the company. At the same time, Texaco signaled that the stakes could be high enough to raise concerns about its credit rating.
Greenmail is the payment of a premium price for the shares held by an investor threatening a takeover of a company. Icahn has insisted that he isn't seeking greenmail, but Texaco has described that as a secret agenda of the corporate raider.
"Both Texaco and Mr. Icahn reiterated that any resolution of differences will not include consideration for any shareholder that is not equally available to all Texaco shareholders," the statement said. "Any such resolution would also require that Texaco be satisfied that it would retain an investment grade credit rating."
Texaco declined to elaborate, and there was no separate comment from Icahn. The statement said that the discussions would lead to an adjournment of the annual meeting to June 14 if either side requests it.
Icahn, a longtime critic of Texaco management, bought his stake in the oil company while it was in bankruptcy pending the settlement of its epic legal battle with Pennzoil over a Texas jury's finding that Texaco wrongly interfered with Pennzoil's plan to take control of Getty Oil Co.
Texaco agreed to pay Pennzoil $3 billion and emerged from bankruptcy April 7. It subsequently acted to deflect criticism from Icahn and drive up the price of its stock, specifically by restoring its $3 per share annual dividend and expanding a restructuring plan.
Those steps were generally well received on Wall Street and thought to have weakened the position of Icahn, who has nominated a slate of five directors for election to Texaco's board. On May 3, Texaco sued Icahn to block his proxy fight for the board seats.
The harshly worded lawsuit accused Icahn of entering into a "secret agreement" with another, unnamed Texaco shareholder to coordinate their stock purchases, and charged him with a host of trading irregularities.