by Coll, Steve;
Lipton said that he was on his way.
In an elevated alcove of the Pierre’s lobby, the Texaco executives and advisors sat around a coffee table and tried to determine what they should do next. There was a discussion about Gordon Getty’s character, as it pertained to bargaining over price. The question was whether the psychology of the meeting suggested that McKinley would be better off just shooting his wad, offering his highest price from the start, or whether he should offer a lower price and let Gordon try to bargain.
“I personally read Mr. Getty as being a sort of genteel person who would not like to haggle. I think we would be best off just giving him whatever is the best price that we are willing to offer,” Weitzel advised. It wasn’t clear to Weitzel what that best price was. The directors had authorized a maximum of $125, but it wasn’t clear whether McKinley would go that high.
“I think you should offer the $125,” Weitzel urged McKinley. “I think from my conversations with Lipton that it would probably be acceptable to the museum, and also, I don’t think this is a situation where haggling will be successful.”
McKinley, however, was not giving a clue as to his intentions. He was only asking the others for their opinions.
In the middle of this discussion, Marty Lipton walked into the Pierre lobby. He spotted Wasserstein and the Texaco executives and approached their table.
“We met with Gordon, but it’s not clear to us that he wants to receive a proposal from us. We’re concerned about what his position is, whether he would be receptive to an offer,” Lipton was told. As the museum’s attorney listened, it seemed to him that Texaco’s executives were deeply confused by their meeting with Gordon and that they were uncertain what to do next or what Gordon would like them to do next.
“Based on the conversations I’ve had in the past with him, I think he would be interested in receiving a proposal,” Lipton finally said. “I think it’s best that I go upstairs and talk to the people in Mr. Getty’s suite.”
When Lipton arrived, he greeted his close friend Larry Tisch. The Texaco executives believed that Tisch was Gordon Getty’s friend, but that was not how Tisch regarded his presence at the Pierre that night. He had met Gordon no more than three times; he did not consider the Getty scion to be his friend. It was Marty Siegel who had summoned Tisch from the uptown birthday party, and it was Marty Lipton to whom Tisch felt loyalty. Neighbors in Manhattan, veterans together of other takeover wars, Lipton and Tisch were close confidants.
Briefed on Gordon’s impasse with McKinley, Lipton proposed a solution. He asked Gordon whether, assuming McKinley offered an acceptable price, he would be willing to sign a document saying that except for the restraining order imposed by the California courts, Gordon would like to sell all of his shares to Texaco. With such a written assurance from Gordon, Lipton said, Texaco could close its deal with the museum and the company and then buy Gordon’s shares when the court order was lifted. After discussing the idea with Tom Wood-house, Gordon said that Lipton’s proposal was acceptable. The question now was price. They went back and forth for a while, but finally, Gordon agreed that if the price was $125 per share, he would accept Texaco’s offer.
Armed with that declaration, Lipton and Tisch left Gordon’s suite and returned to the hotel lobby. The Texaco group was still sitting at its table, talking.
“Have you all got a price that you’re willing to give Mr. Getty?” Lipton asked as he approached them.
“Yes,” McKinley answered.
“What is it going to be?”
“Well, I was thinking of something along the lines of $122.”
“That just won’t do it,” Lipton insisted. “Gordon is never going to agree to that.”
Tisch joined in. “That’s not going to be enough. You need to do $125 if you’re going to get his agreement.”
“If I were to go to $125, what do you think would be the reaction of the Getty Oil directors?” McKinley asked Tisch.
“I’ve spent a couple of days with those people and I am confident that the Getty board would fully support an acquisition by Texaco if you’re offering all shareholders $125 per share. I think you ought to go upstairs and say $125 because anything less won’t do it.”
The badgering of McKinley continued even in the elevator. By the time they reached Gordon’s door, none of them was entirely certain what the Texaco chairman would do.
When they entered, there was at first some general conversation unrelated to price. Finally, McKinley turned to Gordon.
“I am prepared to make an offer since you said you would be happy to receive one. I’ve given it a lot of thought as to what the price should be. I had been thinking of a price of about $122.50.” McKinley paused and curled his lips into a half-smile. “But I have gotten some indications here that there is another price that would be more agreeable to you, and so I am prepared to offer—”
Before McKinley could finish his sentence, Gordon burst in. “I accept!” he declared. The suite erupted in laughter. Gordon calmed himself. “Oh. You are supposed to give the price first.”
“Yes,” McKinley said. “I am prepared to go to $125.”
“Fine,” Gordon replied. “Fine. Thanks. I accept.”
There ensued a discussion of the document earlier proposed by Lipton, wherein Gordon would declare his intention to sell to Texaco but for the order imposed by the California courts. As the others talked, Lipton sat down on a couch and began to write the document out by hand. As Marty Siegel watched him, he thought back to a similar scene some months before, at the Lasky offices in San Francisco, where Lipton had written out the plainly worded standstill truce in his own hand. That agreement had lasted just a few weeks. Siegel hoped this one would be more enduring.
When Lipton was finished, Tom Woodhouse telephoned his partner Tim Cohler in California, explained what had transpired, and read him Lipton’s draft. Cohler suggested a few changes which were negotiated with Lipton, and then a new copy was written out. Finally, around eleven-thirty, the document was ready for Gordon’s signature.
The Getty scion hesitated. “Moses Lasky has been my family’s lawyer for many years,” Gordon said. “In my mind, he knows more about the history of the family trust than anybody else alive. With something this important, I would feel more comfortable if Mr. Lasky had reviewed it.” Turning to Tom Woodhouse, Gordon said several times that his decision to consult Lasky, who had remained in San Francisco since the Pennzoil tender was announced, was in no way a reflection of his opinion of Woodhouse’s abilities. Whether he did or not, Woodhouse assured his client that he took no offense.
They telephoned Lasky at home and at his office and found that he had gone out to dinner and that no one knew where he could be reached. They left urgent messages, but it was not until well after midnight when Lasky returned the calls, listened to the document drafted by Lipton, and said that he thought Gordon was doing the right thing. Thus assured, Gordon signed the document and made arrangements to begin final negotiations with Texaco the next day. They had, after all, reached only an agreement in principle, or something like it.
Later on, there would be a great deal of discussion about Gordon Getty’s state of mind that Thursday night at the Pierre Hotel. The central question was whether the conversations and negotiations that passed in his suite that evening constituted a “squeeze” of the sort Bart Winokur had warned about one year before. Had Gordon been forced to sell to Texaco? It depended entirely on who one asked. John McKinley, for one, adamantly insisted that if Gordon had not wished to receive an offer from Texaco, then he and his team of executives and advisors would have walked away from the entire deal—that he would only have bought Getty Oil if all three parties agreed to sell. That was in keeping, McKinley said, with Texaco’s policy of only making friendly acquisitions.
For his part however, Gordon had the strong impression that he had no choice but to sell to Texaco—that if he didn’t, McKinley would make his deal with the directors and the museum, locking up 60 per
cent of the company’s stock, and then would squeeze Gordon out. Gordon would be the juice. McKinley never said he would do so; in fact he said the opposite. Gordon merely drew the inference. Gordon said later, for example, that he had no idea whether his takeover agreement with Pennzoil was still in effect that night—all he knew was what his lawyers told him. And everyone around him advised that he should sell. Of course, even if Gordon had wanted to sell, it was essential for everyone involved that he at least appear to have no choice in the matter. The provisions of the trust document held that the family’s Getty Oil stock could only be sold to avoid a loss. And so as it had from the beginning of Getty Oil’s difficulties, the question of Gordon’s motives, his ambitions, remained in doubt.
“I wasn’t in every room at every time,” Gordon Getty said later, attempting to explain his critical decision that Thursday night. “The Getty board, many of them were treating me as an enemy at that time and wouldn’t necessarily tell me what they knew. Getty management, even more so. What little I did know—I wouldn’t have known independently if I was free to deal with Texaco when Texaco came along. I wouldn’t have dealt with them without my attorney’s advice on the matter. My attorney’s told me that they thought I was free, but they weren’t sure of it and they wouldn’t advise that I deal with Texaco without the indemnification [against future lawsuits] from Texaco. And if I were free to deal with Texaco, however, I had a pretty clear fiduciary duty to deal with them because it was clearly in the interest of the [family] trust to make the Texaco deal as opposed to the Pennzoil deal. And besides, I probably no longer had the option of making the Pennzoil deal at that point in time, with the museum and the board lined up in a different way and the Texaco deal being clearly in the interests of all stockholders other than the trust—it meant that the Pennzoil deal was probably no longer obtainable once Texaco came along. So if I was free to accept the Texaco offer, I certainly should. And so I did.”
And with that, Gordon Getty ended his family’s century-old ownership of Getty Oil Company; indeed, he ended Getty Oil Company itself. But he did not, as it turned out, manage to sweep away his troubles.
24
Big Boys
It was a sleepless weekend for most of them, and by Sunday it was over. John McKinley had won; Getty Oil belonged to Texaco. Really, the suspense was over by dawn on Friday, just eight hours after Lipton, Tisch, Wasserstein, McKinley, and the rest of them cleared out of Gordon Getty’s suite and returned to Lipton’s midtown offices. All through the night, Lipton sat face to face with Texaco’s lawyers and executives, negotiating a final agreement to sell the museum’s shares. Lipton got virtually everything he asked for, including an indemnification against all future lawsuits arising from the deal. The bespectacled attorney assured Texaco that it faced ho serious liability by offering this guarantee, except perhaps for some legal fees that might arise if the museum was forced to defend nuisance lawsuits. He showed them Pennzoil’s “Memorandum of Agreement” with Gordon Getty and said that it did not represent a binding contract. Lipton did not, however, produce the notes of Getty Oil’s marathon board meeting at the Inter-Contintental; nor was he asked to do so. In Lipton’s adamant view, the board’s 15–1 vote to approve the $112.50 offer from Pennzoil was merely an authorization to negotiate, not a final deal. There was nothing for Texaco to worry about, Lipton said. They should just sign the documents.
And this was Marty Lipton, after all, a kind of roving corporate statesman, renowned not merely for his ability to consummate deals, but for his integrity and his vision of the merger business. Even that night, there was developing among Texaco’s leading executives a deep respect for Lipton, a dependence upon him. It was not merely Lipton’s reputation. It was his position in the deal. As representative of the Getty Museum, Lipton was forced to mediate the bitter resentments between Sid Petersen and Gordon Getty, resentments which predated Lipton’s involvement in Getty Oil’s affairs by more than a year. To many of those involved, and particularly to the Texaco executives, Lipton had acquitted himself beautifully. At the critical turning points—in London, in San Francisco, at the Inter-Continental—he had managed to forge a solution, even if it was only temporary. Now Lipton was again in the middle. Summoned by Marty Siegel, he had come that Thursday night to the Pierre and had pushed both Texaco and Gordon to an agreement. When he returned to his law offices after midnight, he continued his work, quickly negotiating a final document with Texaco that would become the prototype for agreements between Texaco and Getty Oil, and between Texaco and Gordon. Lipton had accomplished in less than twelve hours what Pennzoil had failed to accomplish in more than two days: he had closed the deal. Lipton and his client would come to view this triumph as a by-product of the attorney’s long experience in mergers and acquisitions; Hugh Liedtke and his advisors would regard Lipton’s success rather differently.
Indeed, for Pennzoil’s executives and advisors, the denouement was devastating. Arthur Liman, the Manhattan lawyer who had done so much, he thought, to close a deal with Getty Oil’s directors at the Inter-Continental, arrived at his office Friday morning to find that Texaco had issued a press release over the broad tape declaring that it had made a deal to buy the museum’s shares for $125, that Getty Oil’s directors had “approved in principle” a similar transaction for the public shares, and that Gordon Getty supported the takeover. Stunned and angry, Liman picked up his telephone and called Marty Siegel, Gordon’s investment banker.
“Martin, the announcement on the tape has just been read to me,” Liman said.
“Arthur, I’m sorry,” Siegel replied.
“Marty, I am not going to be the messenger to Liedtke this time. You better call Hugh Liedtke and tell him yourself about this and not slink off.”
Liman said later that he did not telephone Marty Lipton, the man with whom he had so successfully negotiated in the hallways of the Inter-Contintental, because he was too upset.
Apoplexy was the mood in Hugh Liedtke’s Waldorf apartment as well. When Liman telephoned to report on his conversation with Siegel, it became clear to Pennzoil’s chairman that Gordon had betrayed him—either that, or Gordon had been forced into betrayal by Texaco and Marty Lipton. At first, Liedtke had hoped that there was still a chance to rescue Gordon from Texaco’s clutches and to renew their joint takeover bid. When he heard from Liman, he knew there was no hope: Gordon had been thrown over. After a discussion with his top executives, Liedtke decided that the only way to frighten off Texaco was through a direct threat to the Getty Oil board of directors. In addition, if he was now going to lose Getty Oil to Texaco, Liedtke wanted to be compensated for his trouble: he wanted to exercise the 8-million-share option, the one Joseph Perella of First Boston had earlier identified as a way to “take care” of Liedtke if Texaco won out. If Texaco honored the option, Pennzoil could at least earn many millions in trading profits on the deal. Just after noon, Liedtke dispatched from his suite the following telegram, addressed to the directors of Getty Oil Company in Los Angeles:
“Gentlemen: We expect you to comply with the terms of your agreement with Pennzoil Company approved by your board by a 15–1 vote only three days ago, including specifically the option granted to Pennzoil to purchase eight million Getty treasury shares at $110 per share. If you fail to keep your agreement, we intend to commence actions for damages and the shares against Getty Oil Company, your individual board members, the Getty Trust, the Getty Museum, and all others who have participated in or induced the breach of your agreement with us. In your evaluation of your course of action, we trust that you will consider not only your obligations to us but also the significant antitrust issues presented by the Texaco offer, your obligation to those who have made significant investment decisions in Pennzoil securities based on your public announcement as well as the future well-being of your employees. Very truly yours, J. Hugh Liedtke, chairman of the board and chief executive officer, Pennzoil Company.”
When Liedtke’s message arrived, however, the Getty oil di
rectors were not available to consider its contents. They were at that moment in the midst of a “telephonic board meeting,” a conference call linking directors scattered about the country in Los Angeles, New York, Chicago, Phoenix, Philadelphia, Austin, Tulsa, and Riverside, California. The purpose of the meeting was to give approval to the deal with Texaco—a kind of approval different from what the directors believed they had given Pennzoil earlier in the week.
“Would acceptance of the Texaco offer preclude consideration of any higher offers?” Getty Oil director Henry Wendt asked at one point during the hour-long conversation.
“Texaco contemplates that its agreement with the company would prevent the company from seeking further offers or disclosing any proprietary information or discussing the possibility of any other offers with others,” Geoff Boisi answered. “Texaco now has a lockup on the museum shares. McKinley expects that no further action will be taken to frustrate the deal.”
McKinley also expected, as it happened, that no steps would be taken to “take care” of Hugh Liedtke. The 8-million-share option would not be honored, he said—there was no deal with Pennzoil to require it. Of course, that view was shaped by the advice McKinley received from his own lawyers, from Marty Lipton, from the representatives of Sid Petersen and the Getty Oil directors. Everyone McKinley talked with told him that there was no deal with Pennzoil. That Liedtke had focused on the option in his telegram seemed to some evidence that Pennzoil’s chairman himself didn’t believe that he had a deal, that he was interested primarily in a profit for his trouble. In any event, both McKinley and Sid Petersen elected to ignore the threats in Liedtke’s telegram that Friday. Indeed, Petersen decided to preempt those threats: his general counsel, Dave Copley, advised that Getty Oil file suit in Delaware seeking judicial confirmation that there was no deal with Pennzoil. That way, subsequent lawsuits would likely be tried in Delaware, a state renowned for sophisticated judges and a legal system favorable to corporations. Petersen authorized the strategy and a lawsuit was filed that Friday afternoon.