by Coll, Steve;
Liman was stationed in Gordon’s two-room suite around the corner. After twenty-five hours, Liman had begun to feel like a hostage. He kept asking, “Can I go home? Can we get it over with?” and always the answer was no, there was still more to be negotiated.
Now, just before seven, the advisors came streaming out of Sutton Room II and into Gordon’s suite. Lipton led the way; behind him came Marty Siegel, Tim Cohler, Bart Winokur, and Geoff Boisi.
Liman was told about the 15–1 vote. It was now necessary for Liedtke to formally raise his offer to $112.50. Liman said that he would immediately telephone the Pennzoil chairman at his Waldorf apartment. The others reminded him that Goldman, Sachs was as yet refusing to issue a fairness opinion, that they would have to be persuaded to do so in the final negotiations. Someone mentioned that the board had voted to indemnify Getty Oil’s top executives and to provide them with lucrative golden parachutes.
Liman picked up the phone and called Liedtke.
“Hugh, they’ve come back. They voted fifteen to one in favor, but I’m sorry, they want five dollars guaranteed in five years.”
“Is that it?”
“I’ve asked them about it. That’s it except for two little things.”
“What are those ‘little things?’” Liedtke’s cynicism was evident.
“One is they’ve indemnified the management on any actions involving what they did to Gordon Getty and the museum and so on.”
“That’s no problem,” Liedtke said.
“Second, they want the executive compensation committee to be able to give golden parachutes.”
“How many people?”
Liman cupped the phone and turned to the advisors in the suite. “How many people?” he asked.
“Something like seven to nine,” was the answer, and Liman repeated the figure to Liedtke.
“That’s okay, too. Do we have a deal at this juncture?”
“That’s it.”
“You can tell them yes,” Liedtke said.
Liman turned to Marty Lipton. “My client accepts.”
“We have to go back into session,” Lipton replied.
“Why do you have to go back in session?” Liman demanded. “I thought you told me that the board had voted this and it was done.”
“No, they voted the counterproposal. Now I have to communicate to them that you have accepted the counterproposal.”
“Fine,” Liman replied.
“You can come and wait outside the room,” Lipton said. “This is only going to take two seconds.”
The directors inside Sutton Room II were now standing, putting on their coats, gathering their briefcases and papers. When the door was closed again, Marty Siegel announced that Pennzoil had accepted the board’s counterproposal. The meeting was adjourned. Bart Winokur tried to ask about the details of the final negotiations with Pennzoil and whether a document would come back to the board for approval. Lipton cut him off, saying that normally a final, written takeover agreement would come back to the directors for ratification.
There would later be serious dispute about precisely what happened next. This much was agreed upon by everyone: The door to Sutton Room II opened. The directors and their advisors began to wander out. Arthur Liman was standing in the hallway outside the room. He was waiting to hear what had happened inside.
Liman later testified under oath that either Marty Lipton or Marty Siegel, or perhaps both of them, stepped into the hallway and said, “Congratulations, Arthur, you’ve got a deal.” Lipton testified that he did not remember saying any such thing, and that he was in no mood to congratulate anyone, principally because Goldman, Sachs had not yet agreed to provide a fairness letter sanctifying the transaction. Siegel’s memory about the incident was vague. Unlike Lipton, however, Siegel represented Gordon Getty and thus was on the same side of the deal as Liman, who represented Pennzoil. Conceivably, Siegel would have more reason to be pleased about the board’s action than Lipton. In any event, Liman testified that after this initial round of congratulation, he asked permission to enter Sutton Room II to thank the Getty Oil directors for their arduous and diligent efforts. Liman said that he shook hands with a number of the board members, who made remarks to him such as “Congratulations” and “Congratulations to you.” However, a number of directors and advisors present at the board meeting testified later that they did not recall seeing Liman in the room after the final vote. None of them remembered shaking hands with the Pennzoil attorney.
The issue of who was in a congratulatory or celebratory mood at seven o’clock that Tuesday evening would eventually become a critically important one. At the time, however, there were no pictures taken of smiling or drooping faces, no notes made about the facial expressions of the participants. When the time came to sort the matter out, there was only memory, with all of its conveniences.
About this much, too, there was no dispute: In the first hours following the conclusion of Getty Oil’s emergency board meeting that Tuesday, January 3, Gordon Getty and Hugh Liedtke were both ecstatic. They believed that they had won, that they had taken control of Getty Oil for $112.50 per share. For Gordon particularly, it was the triumphant end of a long and difficult campaign against Sidney Petersen.
Soon after he heard the good news from Arthur Liman, Hugh Liedtke, who was still at his Waldorf apartment, telephoned Gordon’s suite at the Pierre. Ann picked up the phone; Gordon had stepped out for a moment, she said.
“I’ve heard the news and I’m delighted,” Ann told the Pennzoil chairman. “We’re going to have a champagne party here to celebrate.” She invited Liedtke to join them. The Pennzoil chairman thanked her but asked for a rain check, saying that he was “running awfully late” to his own celebration dinner with his company’s top executives. They were all dining at the “21” Club.
“I understand,” Ann Getty said. “Congratulations.”
And with that, Hugh Liedtke went on his way, secure in the belief that in the space of just a week, he had managed, with Gordon Getty’s cooperation, to transform the modest Pennzoil Company into one of the largest oil corporations in the world.
* Lipton said later that he believes he asked “Who knows?” rather than “Who cares?” in response to Stuart’s question. It was a point of potential significance in subsequent litigation. Under oath, Lipton said that he could not be absolutely certain which was accurate, but said that he would “defer” to the “Who cares?” version in Dave Copley’s notes of the meeting.
20
An Agreement in Principle
The immediate question on the lips of the lawyers and bankers as they gathered up their belongings at the Inter-Continental Hotel that Tuesday evening was this: what should we do next?
They congregated and talked in the third-floor hallway; no simple answers were forthcoming. It was fine for Gordon Getty and Hugh Liedtke to sip champagne and toast their success over gourmet cuisine. Such were the prerogatives of victory. It was fine, even, for the ashen, exhausted Getty Oil directors to return to their hotel rooms, sleep, pack their bags, and prepare for their journey home. The directors had done what they could. But for the advisors, the game-players, the ordeal was far from over. There were documents to be drawn up, points to be negotiated, financial arrangements to be made, and press releases to be issued. The latter problem—disclosure—was an especially tricky and important one. In the week since Pennzoil’s original 20 percent tender offer—Liedtke’s “Christmas surprise”—neither Getty Oil nor anyone else had made a formal public announcement about the progress of negotiations. There had been some leaks, and some sketchy reporting in the financial press about a possible alliance between Liedtke and Gordon, but no official confirmations. Under the law, companies involved in a takeover were required to inform the public if any significant agreement was reached, the theory being that public stockholders had the right to make fully informed investment decisions. The Getty Oil board’s 15–1 vote approving the $112.50 proposal, whatever its ultimate significance, wa
s certainly a meaningful event. It had to be disclosed to the public—and quickly. As they talked about it, the lawyers and bankers for all the parties involved decided that a press release should be their first priority. Even if it took them all night, they had to get something out before the stock market opened in the morning. Then, with their obligations to the public met, they could begin negotiations to produce a final, detailed merger agreement.
Phone calls went out from the Inter-Continental and a new bevy of advisors was summoned: the financial public relations experts. Pennzoil had hired a New York firm, as had Getty Oil. Each party to the deal designated one or more advisors to help write the press release, to explain precisely the agreement defined by the board’s final 15–1 vote. For the museum, Marty Lipton, who was exhausted from the marathon negotiations, asked his associate, Patricia Vlahakis, to handle the matter. Lipton wanted to get some rest. Ordinarily, in a deal of this size and complexity, Lipton would have assigned a battery of experienced partners from his firm to supervise the preparation of a press release, but because of the odd circumstances of Lipton’s involvement—the fact that he had regarded representation of the museum as a personal favor to Harold Williams, not as a major paying matter for his firm—there was no one but Vlahakis who understood the issues. For Gordon, Marty Siegel indicated that he would take charge; Siegel had helped write hundreds of takeover press releases in the past. For Getty Oil itself, there was Bart Winokur, Geoff Boisi, and several other Wall Street lawyers. Dave Copley, too, said that he would go along as an officer of the company, to approve any release in Getty Oil’s name. Finally, for Pennzoil, there was Arthur Liman and his partners at Paul, Weiss, Rifkind, Wharton & Garrison. Liman volunteered his firm’s offices on Third Avenue as the site for all-night preparation of the press release.
It was eight o’clock by the time all of the advisors arrived at Paul, Weiss. At first, they all crowded together in a conference room and tried to decide who should do what, when, and in what order. There was a great deal of confusion and competing conversation. There were questions about who was representing whom and in what capacity. Only the museum, represented by Patricia Vlahakis, who was just a couple of years out of law school, had but one retainer at the meeting. Pennzoil, for example, was represented by two law firms—the New Yorkers from Paul, Weiss and the Texans from Baker & Botts—as well as an investment banker and a public relations firm. For Gordon, there were Cohler and Woodhouse from the Lasky firm, as well as Marty Siegel and Siegel’s own Wall Street lawyers. Similarly, Getty Oil was represented by two different law firms, one based in Philadelphia and another on Wall Street, plus an investment banker, the investment banker’s law firm, and a public relations outfit. None of the principals was present, except for Dave Copley. It was like a zoo—and since most of the advisors were being paid by the hour, it was a very expensive zoo.
It became quickly clear to them all that responsibilities had to be delegated, or else nothing would be accomplished. It was decided that the public relations experts should take the first crack at a press release. At the same time, it was suggested that Pennzoil’s attorneys should write the first draft of a final merger agreement—the protocol of the merger game provided that the winner presented the first version of a final document, with all the details in place. The idea was that while the press release was finalized, Pennzoil’s lawyers would spend all night preparing their draft. Then, in the morning, lawyers for the company, the museum, and Gordon Getty would join the negotiations.
This much decided, the advisors dispersed from the central conference room and began to roam about the Paul, Weiss offices, waiting.
Hank Londean, the Getty Oil executive in charge of public relations, bumped into Richard Howe, a Pennzoil executive with similar responsibilities, in the corridor.
“Congratulations,” Londean told him. “You’re stuck with Gordon Getty now.”
“Thanks,” Howe replied.
Such lighthearted comity did not extend to others of the advisors. In groups to two or three, they began to bicker with each other about what should be said, or not said, in the press release. At one point, Patricia Vlahakis, who was feeling frightened by the responsibility thrust upon her by Lipton, her firm’s most senior partner, spotted Marty Siegel speaking on the telephone in one of the Paul, Weiss offices. She listened—it was clear that Siegel was talking to a newspaper reporter, explaining what had happened at the Inter-Continental. Vlahakis, a petite, attractive woman with a capacity for strident outburst, became livid. She demanded that Siegel hang up the phone immediately. A public relations man representing Gordon intervened and explained to Vlahakis that Siegel was only trying to be sure that the Wall Street Journal got its story right for the next day. (This in itself was not unusual, since Siegel cultivated relationships with a wide variety of financial journalists.) But Vlahakis would have none of it—they had not even agreed on the terms of a press release, and Siegel was already gabbing with a reporter, she said.
Vlahakis stepped into the office. “If you don’t get off the phone, I’m going to reach over and hang it up,” she said.
Siegel concluded his conversation.
From there, relations between the advisors continued to deteriorate. Shortly after nine, a draft press release prepared by the public relations experts was passed around. Vlahakis took her copy to the law firm’s reception area and sat down to read it. The very first line of the release stated that the Getty Oil directors had voted to “accept” a plan that would provide for the merger of Pennzoil and Getty Oil. In the third paragraph, it read, “The agreement provides.…” Vlahakis stopped reading—this was totally unacceptable, she thought. No such agreement yet existed; there had only been a vote by the board. One of the lawyers for Gordon Getty wandered by and the two of them decided that they should start from scratch. In his own hand, and with Vlahakis’ assistance, the lawyer wrote: “Getty Oil Company, Pennzoil Corporation, the J. Paul Getty Museum, and Gordon P. Getty as trustee for the Sarah C. Getty Trust, dated December 31, 1934, announced today that they had agreed in principle.…” Perhaps it was not Hemingway, but to Vlahakis the key point was “agreed in principle,” a term of art in the merger business. Everyone had his own idea about what an “agreement in principle” actually was. At the very least, the phrase implied that a final document had yet to be drafted, and thus it accurately reflected the state of affairs at Paul, Weiss that evening.
While Gordon Getty’s lawyer finished the drafting, Vlahakis was called aside by Bart Winokur. Winokur, too, had seen the press release drafted by the public relations experts, and he was unhappy. The draft contained a paragraph stating that Getty Oil would immediately purchase the museum’s 9 million shares, before the public’s shares were bought by Pennzoil.
“There is no way the company is going to buy back the museum’s shares,” Winokur insisted. To do so would change the balance of power at Getty Oil before the public shareholders received their compensation.
“That’s unacceptable,” Vlahakis retorted. “The company has to buy them.”
“There were statements made at the board meeting and in the various caucuses that the museum was going to be treated no differently than anyone else,” Winokur said. “There’s no way the company is going to be in a position where the museum’s shares are bought first because then there would be a possibility that Pennzoil would not go through with the deal.”
Vlahakis was vehement. “If you’re not going to agree on that, then there’s no deal.”
“So be it,” Winokur said.
They agreed that, given the chaos around them, they should agree to disagree, to set the issue aside and be certain that any reference to the museum’s shares was removed from the final press release. The pair walked back into the main conference room where most of the lawyers and bankers were gathered, now arguing about the draft by the public relations experts.
Finally, the lawyer who had scribbled a new draft with Vlahakis in the reception area entered the conference room a
nd read his version aloud. Everyone agreed that it was an improvement. Almost immediately, however, Moulton Goodrum, the Baker & Botts attorney representing Pennzoil, announced that his client’s name would have to be removed from the release.
“I’ve looked at the new draft, and I have no basic problem with it, but as a result of all the squabbling between the parties, and because I can’t reach my client at the restaurant, I myself have no authority to authorize the release,” Goodrum said. “I want Pennzoil’s name off of it.”
Patricia Vlahakis, concerned now that events were careering wildly and that she was steering the museum’s course without any guidance from her senior partner, decided to call Marty Lipton at home. She told him about her argument with Winokur over the purchase of the museum’s shares. “In light of the fact that there’s no way we are going to work through that issue tonight, as I can see it, the only way the press release can go out is if it makes no reference to the museum’s shares.”
“I agree,” Lipton said.
Reassured, Vlahakis returned to the central conference room and announced, “We are not going to hold up issuance of a press release so long as the language about the museum’s shares is deleted. But everybody in this room should understand that there is no agreement as to how the museum’s shares are to be treated in any transaction. I want everyone to understand that there are absolutely no agreements on that issue.” The young lawyer spoke emphatically and repeated her message several times to be sure that there would be no misunderstanding.
With Pennzoil and the museum now both out of the process, Stuart Katz, one of Getty Oil’s Wall Street lawyers, took charge of the drafting. Sitting at the conference table, he began to write out yet another draft based on a volley of comments from the lawyers, bankers, and public relations executives in the room. It was after midnight before the one-page release was completed and turned over to the PR firms for distribution to the wire services and major news organizations first thing in the morning.