by Coll, Steve;
“Well, what on earth is that?” Liedtke demanded.
“They want to present to you an outline of what they think you ought to talk about with Mr. Getty, and then they’ll go up and review it and take it up and review it with Mr. Getty.”
“Like hell they will,” Liedtke answered forcefully. “I’m going to deal directly with Mr. Getty and I’m not going to deal with third parties. I don’t want them telling Mr. Getty what I think or what I’m offering. I want to sit right across the table from him and tell him myself so there won’t be any question. And if they can’t arrange that, then I’m not going to have any ‘structured’ meeting.”
Glanville passed Liedtke’s message on to Siegel. Siegel asked if he could speak directly with Liedtke, and Glanville handed him the phone. They talked for about twenty minutes, and Liedtke was no less adamant: he was not going to have this deal negotiated by bankers and lawyers. Either he was going to sit down with Gordon Getty or there was going to be no deal at all.
They had reached an impasse. Neither Siegel, Cohler, nor Woodhouse was willing to agree to a face-to-face meeting between their client and Hugh Liedtke. The basic terms of an alliance between Gordon and Pennzoil had been agreed upon, but there was no consensus on how the deal could be negotiated. As the meeting ended, Liman telephoned Liedtke and told him that they could not arrange a summit.
Hugh Liedtke decided that he would try to arrange a meeting with Gordon Getty himself. He telephone Fayez Sarofim, a stock fund manager and investment advisor based in Houston who specialized in the oil business. Sarofim’s fund owned a large block of Getty Oil stock. Shortly after the Pennzoil tender offer was announced, Sarofim had telephoned Liedtke to report on a call he had received from Ann Getty. Sarofim told the Pennzoil chairman that Mrs. Getty had wanted to know “what kind of people” the Pennzoil executives were. Now Liedtke thought that perhaps Sarofim could get a message to Gordon through, Mrs. Getty—without it being filtered by Gordon’s lawyers and bankers.
“I think we’re getting the run-around,” Liedtke told Sarofim. “I want to meet at the earliest possible date with Gordon Getty himself and I don’t want to talk through third parties.”
Sarofim said that he might be able to help. He said that he knew Alexander Papamarkou, Ann Getty’s stockbroker and social escort, and that perhaps through him a message could be passed to Gordon.
The next morning, Saturday, Liedtke heard back from Sarofim. “The meeting is going to take place,” Fayez confided. Liedtke thanked him. And he waited to hear from Gordon through more official channels.
That same morning in Manhattan, however, it seemed to the advisors of Getty Oil Company management that Gordon Getty was far from ready to enter into any agreement with Hugh Liedtke and Pennzoil. Indeed, it seemed to Bart Winokur and Geoff Boisi that Gordon was on the verge of signing an entirely different deal: a temporary truce with Sid Petersen that would raise a united front against Hugh Liedtke’s takeover bid.
It was not Gordon himself who conveyed this impression to Winokur and Boisi. Rather, it was the same trio of lawyers and bankers who had negotiated with Arthur Liman and Jim Glanville at the Lazard offices the day before—Marty Siegel, Tim Cohler, and Tom Wood-house. They had come that morning to the Park Avenue offices of Wachtell, Lipton, Rosen & Katz to meet with Winokur, Boisi, and Lipton and to negotiate a self-tender plan that would ward off Pennzoil’s 20 percent bid. They had discussed the same idea the day before, after the meeting at Lazard with Liman and Glanville. After hours of complex negotiations, the plan had become fairly simple: Getty Oil would announce a 20 percent self-tender offer at some price above Pennzoil’s $100 per share—exactly what price had not been decided, but Winokur assumed it would be $120 or more—and it would simultaneously announce that the entire company was up for sale if a buyer would come forward within ninety days. Gordon, the museum, and Petersen’s management team would each agree that if a buyer came forward and proposed to purchase the entire company for a price greater than the Getty Oil self-tender, all three parties would sell their shares outright. If no buyer for the whole company made an offer during the ninety-day period, then Getty Oil would execute its self-tender for 20 percent of the public’s shares. As a result, Gordon’s family trust would be moved into a majority position and Gordon could do whatever he pleased with the company. There would be no handcuffs, no supermajorities on the board, nothing. Until that ninety-day “auction period” was up, however, Gordon would have to agree not to exercise power at the company in combination with the museum.
Winokur and Boisi were saying to Gordon, in effect: “We think Getty Oil is worth a lot more than $100 a share if we can only arrange a controlled auction and shop the company to interested buyers. If we’re wrong, you get the company. If we’re right, then you get to sell your shares for billions of dollars, at more than $120 per share.”
That Saturday morning in Marty Lipton’s office, Siegel reported that on Friday night he, Gordon, Cohler, and Woodhouse had discussed this idea at some length. Siegel said that he personally believed that this was the best plan available to Gordon, his client. He could not, of course, vouch for what Gordon might do once he was presented with a document for his signature. At the moment, Siegel said, there were two sticking points.
First was the question of who would be in charge of Getty Oil during the ninety-day auction period. Was Sid Petersen willing to resign? This had seemed to be one of Gordon Getty’s principal objectives ever since he learned about the family lawsuit against him. It had been the key to his proposal to Harold Williams at the Broadway mansion earlier in the week. Now came the crunch point: would Petersen sacrifice himself to buy a ninety-day auction period for the company?
The answer was no. Petersen himself was willing to consider the idea, but his board of directors had made it clear in telephone conversations that they refused to throw him overboard simply to please Gordon Getty. After all they had been through, the directors refused to give in to this last and most egregious of Gordon’s whims, Winokur and Boisi made clear.
Siegel himself did not greatly care whether Petersen resigned. They were not talking about the future of Getty Oil now—they were discussing a ninety-day auction period. If the company was sold, Petersen’s career would likely be over. If the auction failed and a self-tender was executed, then Gordon would be in charge and Petersen would be fired. With all that was at sake, ninety days hardly seemed so important.
But to both sides it was a matter of principle and neither would concede the ground. So they moved on to the second problem: the price of the company’s 20 percent self-tender offer. Boisi and Winokur had been talking about a price of at least $120 per share, and perhaps as much as $130. That way, the company’s offer to its shareholders would be much higher than Pennzoil’s, and Goldman, Sachs could stick to its official opinion that $120 was the minimum fair price for Getty Oil’s stock.
Now, however, Gordon was expressing some doubt about the $120 price. As the meeting progressed that Saturday at Lipton’s office, he sent yet another emissary to express his views. The messenger was Laurence Tisch, one of the best-known and most respected corporate financiers in New York. Larry Tisch was then the chairman of the multibillion-dollar Loews Corporation, a diversified conglomerate with hotel, entertainment, and insurance holdings. With his brother Robert, Tisch had built his companies from scratch—he had grown up on the streets of New York and had worked his way through night school—and by December 1983, he was regarded as one of the shrewdest, most determined corporate executives in the country. Indeed, just three years later, when he acquired control of CBS Inc. Tisch made the cover of Time Magazine. But now, through no particular ambition of his own, he was a director of Getty Oil Company. Back in October, when the three-way standstill truce was signed in San Francisco, Gordon had been empowered to nominate four new directors of his own choosing. He had decided then that he wanted to choose “entrepreneurial” men who were nonetheless highly experienced in the management of large corpora
tions. Gordon’s thinking was that such entrepreneurs would share his perspective as an owner of a huge block of Getty Oil stock; they would know what it was like to be a major shareholder in a large corporation. Such directors, Gordon hoped, would understand the dangers posed by Getty Oil’s entrenched, professional managers—its “club of chief executive types,” as one lawyer involved described the cadre of Petersen, Henry Wendt, Chauncey Medberry, John Teets, and the rest. Lacking social connections himself, Gordon dispatched his wife Ann to recruit Tisch, who agreed to join.
Until that Saturday in December, however, Tisch had played little role in Getty Oil’s affairs. His nomination to the board had only been approved at the November meeting in Houston; he had yet to attend a directors meeting. In the course of things, however, he had talked with Gordon Getty and had learned something about his tangled relationship with Sid Petersen, Harold Williams, Marty Lipton, and the rest. Tisch was very close with Lipton; their luxury apartments were nearby on the upper East Side and together they had pioneered the “power breakfast” at the Regency Hotel during the 1970s, when Lipton represented Loews in its landmark takeover of the insurance company CNA. Now Tisch, trading on his friendships and his widespread reputation for business acumen, hoped to help negotiate a solution to Getty Oil’s problems. The effort was not purely philanthropic: when he accepted Gordon’s nomination to the board, Tisch acquired for his corporation between sixty and seventy thousand shares of Getty Oil stock. He figured that the company’s shares were vastly undervalued by the market.
At the Saturday meeting in the offices of his friend Marty Lipton, Tisch told the assembled lawyers and bankers that Gordon Getty was “definitely a seller” and that Gordon was willing to accept a ninety-day auction period to see if Getty Oil could be sold. Tisch added, however, that Gordon felt the $120-per-share price contemplated for the company’s self-tender was too high.
“Gordon is willing to sell at any price above $110,” Tisch announced.
Winokur and Boisi were incredulous. Here they were willing to establish an auction at which the minimum price for all of Getty Oil—including the 32 million shares controlled by Gordon—would be $120 per share. And now Gordon was saying that he would prefer the minimum price to be $110.
“It’s not often that you ask somebody to be willing to sell at $115 or $120 and he comes back and says, ‘Yes, I’ll agree, but I’ll agree to sell at a lower price,’” Winokur told Tisch.
“Don’t look a gift horse in the mouth,” Tisch replied.
To Geoff Boisi, however, Gordon’s offer was more like a Trojan horse. Gordon wanted the self-tender price lowered to $110 because if the ninety-day auction failed to turn up a buyer, Gordon would own Getty Oil. Suddenly, Gordon would be a buyer of Getty Oil stock, not a seller. And if that was the case, he would rather buy at $110 than at $120. The problem for Boisi was that Goldman, Sachs believed the company was worth at least $120—probably much more. If the company executed a self-tender at $110, it would be contradicting Goldman’s assessment. Despite this problem, Boisi and Winokur agreed to Tisch’s suggestion. They agreed for two reasons. They were under tremendous pressure because of Pennzoil’s bid, and $110 was better than letting Pennzoil buy 20 percent of the company for $100. And second, Boisi was extremely confident that once the ninety-day auction was announced, a buyer for the entire company would be found. Then the public shareholders would be well rewarded, the bankers would all earn millions in fees, and Gordon’s bid for control would be thwarted. Only Sid Petersen and the other top Getty Oil executives would be the losers, and by now there was virtually no hope that their careers could be salvaged.
Winokur told Gordon’s representatives that he would immediately begin to draft a three-way agreement between Gordon, the company, and the museum. The document, which was completed by 10 P.M. that night, New Year’s Eve, provided for a $110 self-tender and a ninety-day auction period. Winokur said that he would deliver the document to Gordon’s suite at the Pierre Hotel as soon as possible, and he did so, before midnight. The Getty Oil advisors assumed that Gordon would sign it the next day. Then the self-tender would be announced and the public auctioning of Getty Oil would begin.
After the meeting with Tisch, however, while Winokur and his partners were hurriedly drafting an agreement, Marty Siegel returned to the Pierre to speak with Gordon Getty. He explained the terms that had been negotiated with Winokur and Boisi. A short time later, Siegel telephoned Hugh Liedtke in Houston.
“Mr. Getty will meet with you tomorrow afternoon at the Pierre Hotel,” Marty Siegel said.
* In a partial tender offer, as Pennzoil’s 20 percent takeover bid was called, the number of shares any single stockholder could sell depended on the total number of shares submitted, or tendered, for sale to Pennzoil. If, after the twenty-one-day waiting period, all of Getty Oil’s shareholders offered to sell to Pennzoil, then the purchase would be “prorated”—that is, each stockholder would be allowed to sell 20 percent of his shares for $100. If less than 20 percent of Getty Oil’s shares were tendered for sale to Pennzoil, then all the shares tendered would be purchased by Pennzoil if it went ahead with the deal.
* Gordon later testified that he recalled Williams’ remark clearly because it “was a rhyme. Put me among a circle of poets for that. That’s the lowest circle in hell, by the way.”
17
At the Pierre
After packing, Hugh Liedtke located a pilot to fly Pennzoil’s corporate jet, rode to the airport, and flew that New Year’s Eve to New York City. He did not arrive in Manhattan until the wee hours of 1984. The empty streets were littered with broken glass and debris from the city’s annual Times Square celebration; it was an eerie scene. Since Pennzoil policy prohibited the company’s chairman and president from flying on the same airplane, Liedtke was alone—Baine Kerr would travel to New York in the morning. Exhausted, Liedtke rode to the copper-domed Waldorf-Astoria on Park Avenue, where Pennzoil maintained a two-bedroom executive apartment on the thirty-eighth floor, and went to sleep.
It was not until noon on Sunday, January 1, that the rest of Pennzoil’s Houston contingent arrived at the Waldorf. Kerr, general counsel Perry Barber, and Baker & Botts partner Moulton Goodrum had flown up together that morning, and their landing in New York had been inauspicious: the wheels of their airplane would not lock into place. The pilot circled the airport trying to fix the problem and eventually he touched down on the runway without incident. But the Pennzoil executives were late arriving in Manhattan and they were a little bit shaken from the ordeal.
Marty Siegel had said the day before that the summit meeting between Liedtke and Gordon would take place at 4 P.M. at the Pierre. In the interim, Liedtke’s New York advisors—attorney Arthur Liman and banker Jim Glanville—arrived at Pennzoil’s Waldorf suite to help plan for the event.
“I want to be certain that if I am going to make a deal with Gordon Getty that I will also be able to make a deal with the museum,” Liedtke told his advisors.
The Pennzoil chairman wanted somehow to include more than 50 percent of Getty Oil’s voting power in any agreement he struck that afternoon. That way, Sid Petersen and his directors could do nothing to block the deal. If Pennzoil, Gordon, and the museum were all part of the same alliance, they could dictate terms to the Getty Oil board. But if the museum held out, then Pennzoil would have the support only of Gordon’s 40 percent. The Getty Oil directors were convening Monday evening to consider their response to Pennzoil’s takeover bid. Liedtke wanted to leave them little room for debate.
“I’m willing to live with the four-sevenths, three-sevenths ratio and with Gordon controlling the board provided that there is an understanding on how the company will be operated,” Liedtke told his executives and advisors. “Gordon Getty does not know how to operate an oil company. Our people would have to operate it. And if this arrangement doesn’t work out, then we would divide up the assets proportionately.”
It was decided that Liedtke, Kerr, Barber, and Glanvill
e would attend the meeting with Gordon at the Pierre. Goodrum would await instructions at the Waldorf. And in an effort to enlist the museum’s cooperation, Arthur Liman would walk up to Marty Lipton’s apartment. Liman had been invited to Lipton’s annual New Year’s Day party, a catered affair where Manhattan’s legal and financial cognoscenti gathered to usher in another year of unbridled prosperity. It was unclear what Lipton thought about Pennzoil’s bid. He had said that the museum was a seller, and the day before he had agreed to the three-way self-tender and auction plan proposed by Getty Oil management. But Lipton was in a bind. If Pennzoil and Gordon forged an alliance without the museum, they would be very close to gaining majority control of Getty Oil. Because of the consent agreement signed by Harold Williams and Gordon in December, it now took fourteen out of sixteen directors to approve any major change of ownership. Williams and Harold Berg were the museum’s only representatives on the Getty Oil board—the two of them alone could not block a deal. If Pennzoil and Gordon took control together, they might squeeze the museum out at an unfavorable price, or lock its shares in as a permanent minority block. Marty Lipton, then, had a powerful incentive to negotiate with Pennzoil to protect the museum’s position. Arthur Liman figured that the attorney’s New Year’s Day party would be a good place to begin the discussions.
Of course, Liman’s talks with Lipton that afternoon depended entirely on the success of the summit meeting between Hugh Liedtke and Gordon Getty. Gordon had recieved many suitors over the past eighteen months, including such monied oil men as Corby Robertson and Boone Pickens, but he had yet to accept a proposal from any of them. The circumstances were more favorable this time: Gordon was deeply angry at Sid Petersen. In addition, Liedtke had put pressure on the Getty family trust by launching his hostile 20 percent tender offer. But not even Gordon’s lawyers and bankers could be certain what their client would do when confronted with a final decision.