<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
(AMENDMENT NO. 18)
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
PENNZOIL COMPANY
(Name of Subject Company)
PENNZOIL COMPANY
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.83 1/3 PER SHARE
(including the associated Preferred Stock Purchase Rights)
(Title of Class of Securities)
709903 10 8
(CUSIP Number of Class of Securities)
LINDA F. CONDIT
CORPORATE SECRETARY
PENNZOIL COMPANY
PENNZOIL PLACE, P.O. BOX 2967
HOUSTON, TEXAS 77252-2967
(713) 546-8910
(Name, address and telephone number of person authorized
to receive notice and communications on behalf of the person(s) filing
statement)
Copies To:
<TABLE>
<S> <C>
Moulton Goodrum, Jr. Charles F. Richards, Jr.
Baker & Botts, L.L.P. Richards, Layton & Finger
One Shell Plaza One Rodney Square
Houston, Texas 77002-4995 P.O. Box 551
(713) 229-1234 Wilmington, Delaware 19899-0551
(302) 658-6541
</TABLE>
<PAGE> 2
This Amendment No. 18 (this "Amendment") amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9, as amended, originally
filed on July 1, 1997 by Pennzoil Company, a Delaware corporation (the
"Company"), relating to a tender offer commenced by Resources Newco, Inc., a
wholly owned subsidiary of Union Pacific Resources Group Inc., on June 23, 1997.
All capitalized terms used in this Amendment without definition have the
meanings attributed to them in the Schedule 14D-9.
The items of the Schedule 14D-9 set forth below are hereby amended by
adding the following:
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
57 Letter dated September 9, 1997 from James L. Pate to Jack R.
Messman.
58 Press Release of the Company dated September 9, 1997.
</TABLE>
2
<PAGE> 3
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
PENNZOIL COMPANY
Dated: September 9, 1997 By: /s/ James L. Pate
James L. Pate
Chairman of the Board, President
and Chief Executive Officer
3
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
57 Letter dated September 9, 1997 from James L. Pate to Jack R.
Messman.
58 Press Release of the Company dated September 9, 1997.
</TABLE>
<PAGE> 1
EXHIBIT 57
Mr. Jack L. Messman
Chairman and Chief Executive Officer
Union Pacific Resources Group Inc.
801 Cherry Street
Fort Worth, Texas 76102-6803
Dear Jack:
Your Schedule 14D-1 amendment filed late yesterday afternoon is remarkable
for its eleventh hour sensational admissions of information which we have long
maintained Union Pacific Resources (UPR) had a duty to disclose. Notwithstanding
the spin you attempt to place on these admissions and your attempt to divert
attention from them by your concurrent attack on our strategic plan, your filing
illustrates the serious credibility problem faced by UPR, both with respect to
the posture of UPR and your offer for Pennzoil Company.
It has been clear to us all along that your offer is a desperate attempt
to solve UPR's problems. Moreover, you are attempting to do so by acquiring
Pennzoil at a price well below its inherent value.
I note here just a few examples from your filing yesterday:
o You, Jack, coined the phrase "VALLEY OF DESPAIR" to describe the trend
of steep declines in production from UPR's Austin Chalk and other
properties and the phrase "WALKING UP THE DOWN ESCALATOR" to refer to
UPR's publicly stated goal of 10% growth per year in spite of such
declines.
o In a submission to the IRS, you stated "[T]here is significant
uncertainty as to how much further the Austin Chalk production can be
economically extended.... Consequently, management has concluded that
[UPR] CANNOT MAINTAIN ITS CURRENT LEVELS OF PRODUCTION FOR EXISTING
PROPERTIES.... Quite simply, [UPR]'s current drill site inventory is
not sufficient to keep [UPR]'s overall production and reserves from
declining significantly in the near future."
o In January 1997, Smith Barney, UPR's financial advisor for the tender
offer, presented a report to UPR valuing Pennzoil from $82.02 per
share UP TO $94.86 PER SHARE. Yet you have written to Pennzoil
shareholders that "Pennzoil, by itself, cannot create sufficient
shareholder value to compete with UPR's $84 per share bid...." Plus,
I think you know that even the Smith Barney range is low and that the
actual value of your purported $84 per share proposal is problematic
and subject to substantial downward pressure.
<PAGE> 2
o UPR's planning memorandum states that "The tender offer would be
accompanied by litigation to remove the shareholder rights plan....
THE LIKELIHOOD OF WINNING IS NIL, BUT THE LITIGATION APPLIES PRESSURE
to [Pennzoil] and provides defense against an unfriendly venue if
[UPR] gets sued."
o UPR's tender offer planning team believed that it was necessary to
commence the offer as soon as possible because of the risk that
Pennzoil's stock price would continue to rise, thereby "diminish[ing]
the perceived premium [to be] paid" by UPR. You hoped that "[a]n
early strike would ... somewhat BLUR THE MARKET'S PERCEPTION of any
subsequent increase in stock price, for which [UPR] would naturally
take credit."
o And that "[t]HERE IS MORE LIKELY GOOD NEWS THAN BAD NEWS" for
Pennzoil, thus the recommendation to strike now before Pennzoil's
stock price reflected the good news.
o UPR's advisors prepared a response for you, Jack, to a possible
question that I might ask, that states "I believe, and apparently so
does the investment community, that you have done a SUPERB JOB of
turning around the company. You have it on the RIGHT PATH."
Your document filed yesterday is a prime example of highly selective
disclosure accompanied by spin control. You well know that your litigation team
fought tooth and nail in federal courts in two states to avoid having to make
the partial disclosures you made yesterday. I can only surmise that it was the
expectation that you would be defeated in the court hearing tomorrow in your
effort to avoid these disclosures that led you to make them at the eleventh
hour. Moreover, you repeatedly downplay these disclosures, by implying that
they do not have the imprimatur of anyone of significance at UPR. I invite you
to go public with the full text of all of the documents referenced in your
filing, including the heavily redacted portions which have been withheld from
everyone. File them in full as exhibits to your Schedule 14D-1. File them in
full in an 8-K so your own shareholders and your analysts can see for
themselves.
While reviewing these documents, I hope your shareholders will ask you the
following questions:
1. According to UPR's own long-range plan, when does production from the
Austin Chalk trend downward and precipitously decline?
2. What is UPR's forecasted drillsite inventory for 1998 and beyond?
3. When does the "drilling machine" run out of raw material? What
happens then?
<PAGE> 3
4. Why should UPR's experiences differ from those of other companies
that are dependent on the Austin Chalk?
5. Why doesn't UPR retain the discipline of independent reservoir
engineers in determining its proved and probable reserves?
Your letter and accompanying press release attempt to divert attention
from the serious deficiencies of UPR's disclosures by alleging shortcomings in
our strategic plan. You well know that our strategic plan has been succeeding
and that there is every expectation that it will continue to succeed. Contrary
to your claim, we have disclosed significant elements of our strategic plan in
our SEC filings, in public advertisements and to our analysts and shareholders.
Our international, Gulf of Mexico, downstream and consumer products initiatives
are well known. We have delivered our plan to UPR in litigation discovery. In
contrast, UPR continues to withhold its strategic plan from Pennzoil in
litigation discovery. Your general counsel Joseph LaSala in a sworn affidavit
has said that UPR's own plan is "proprietary" and "secret" and that UPR would
be "irreparably harmed" by any disclosures of the plan. Under the
circumstances, how can you complain about our strategic plan in light of your
refusal to disclose your own plan? Finally, I am disappointed that you continue
to quote my alleged statement about Pennzoil's stock price over the next four
to five years. I never made that statement and I believe you know it.
Our Board of Directors has carefully and thoroughly reviewed UPR's partial
cash, partial stock proposal and rejected it because it is inadequate and not
in the best interests of Pennzoil and its shareholders. We remain committed to
the continued implementation of our strategic plan which can deliver better
long-term value to our shareholders and has more upside potential than the UPR
proposal.
Sincerely,
/s/ Jim
James L. Pate
<PAGE> 1
EXHIBIT 58
[On Pennzoil letterhead]
UPR MAKES SENSATIONAL ADMISSIONS
Jack Messman Refers to UPR's Trend of Steep Declines in Production as the
"Valley of Despair"
UPR's Financial Advisor Report Says Value of Pennzoil is as Much as $94.86 Per
Share
UPR Memorandum Says Likelihood of Prevailing Against Pennzoil in
Poison Pill Litigation is "Nil"
Houston, Texas --September 9, 1997 - In a letter today from James L.
Pate, Chairman of Pennzoil Company (NYSE: PZL), to Jack Messman, Chairman of
Union Pacific Resources Group (NYSE: UPR), Mr. Pate accused UPR of initiating
an unfounded attack on Pennzoil's strategic plan to divert attention from UPR's
sensational disclosures filed yesterday. UPR made the eleventh hour
sensational disclosures in the face of an impending court hearing concerning
UPR's failure to disclose material information to Pennzoil's shareholders in
connection with its tender offer.
Following is the full text of the letter sent today from Mr. Pate to
Mr. Messman:
Mr. Jack L. Messman
Chairman and Chief Executive Officer
Union Pacific Resources Group Inc.
801 Cherry Street
Fort Worth, Texas 76102-6803
Dear Jack:
Your Schedule 14D-1 amendment filed late yesterday afternoon is
remarkable for its eleventh hour sensational admissions of information which we
have long maintained Union Pacific Resources (UPR) had a duty to disclose.
Notwithstanding the spin you attempt to place on these admissions and your
attempt to divert attention from them by your concurrent attack on our strategic
plan, your filing illustrates the serious credibility problem faced by UPR, both
with respect to the posture of UPR and your offer for Pennzoil Company.
It has been clear to us all along that your offer is a
desperate attempt to solve UPR's problems. Moreover, you are attempting to do
so by acquiring Pennzoil at a price well below its inherent value.
I note here just a few examples from your filing yesterday:
<PAGE> 2
o You, Jack, coined the phrase "VALLEY OF DESPAIR" to
describe the trend of steep declines in production
from UPR's Austin Chalk and other properties and the
phrase "WALKING UP THE DOWN ESCALATOR" to refer to
UPR's publicly stated goal of 10% growth per year in
spite of such declines.
o In a submission to the IRS, you stated "[T]here is
significant uncertainty as to how much further the
Austin Chalk production can be economically
extended.... Consequently, management has concluded
that [UPR] CANNOT MAINTAIN ITS CURRENT LEVELS OF
PRODUCTION FOR EXISTING PROPERTIES.... Quite simply,
[UPR]'s current drill site inventory is not
sufficient to keep [UPR]'s overall production and
reserves from declining significantly in the near
future."
o In January 1997, Smith Barney, UPR's financial
advisor for the tender offer, presented a report to
UPR valuing Pennzoil from $82.02 per share UP TO
$94.86 PER SHARE. Yet you have written to Pennzoil
shareholders that "Pennzoil, by itself, cannot create
sufficient shareholder value to compete with UPR's
$84 per share bid...." Plus, I think you know that
even the Smith Barney range is low and that the
actual value of your purported $84 per share proposal
is problematic and subject to substantial downward
pressure.
o UPR's planning memorandum states that "The tender
offer would be accompanied by litigation to remove
the shareholder rights plan.... THE LIKELIHOOD OF
WINNING IS NIL, BUT THE LITIGATION APPLIES PRESSURE
to [Pennzoil] and provides defense against an
unfriendly venue if [UPR] gets sued."
o UPR's tender offer planning team believed that it was
necessary to commence the offer as soon as possible
because of the risk that Pennzoil's stock price would
continue to rise, thereby "diminish[ing] the
perceived premium [to be] paid" by UPR. You hoped
that "[a]n early strike would ... somewhat BLUR THE
MARKET'S PERCEPTION of any subsequent increase in
stock price, for which [UPR] would naturally take
credit."
o And that "[t]HERE IS MORE LIKELY GOOD NEWS THAN BAD
NEWS" for Pennzoil, thus the recommendation to strike
now before Pennzoil's stock price reflected the good
news.
o UPR's advisors prepared a response for you, Jack, to
a possible question that I might ask, that states "I
believe, and apparently so does the investment
community, that you have done a SUPERB JOB of turning
around the company. You have it on the RIGHT PATH."
Your document filed yesterday is a prime example of highly
selective disclosure accompanied by spin control. You well know that your
litigation team fought tooth and nail in federal courts in two states to avoid
having to make the partial disclosures you made yesterday. I can only surmise
that it was the expectation that you would be defeated in the court hearing
tomorrow in your effort to avoid these disclosures that led you to make them at
the eleventh hour. Moreover, you repeatedly downplay these disclosures, by
implying that they do not have the
<PAGE> 3
imprimatur of anyone of significance at UPR. I invite you to go public with the
full text of all of the documents referenced in your filing, including the
heavily redacted portions which have been withheld from everyone. File them in
full as exhibits to your Schedule 14D-1. File them in full in an 8-K so your
own shareholders and your analysts can see for themselves.
While reviewing these documents, I hope your shareholders will
ask you the following questions:
1. According to UPR's own long-range plan, when does
production from the Austin Chalk trend downward and
precipitously decline?
2. What is UPR's forecasted drillsite inventory for 1998
and beyond?
3. When does the "drilling machine" run out of raw
material? What happens then?
4. Why should UPR's experiences differ from those of
other ompanies that are dependent on the Austin Chalk?
5. Why doesn't UPR retain the discipline of independent
reservoir engineers in determining its proved and
probable reserves?
Your letter and accompanying press release attempt to divert
attention from the serious deficiencies of UPR's disclosures by alleging
shortcomings in our strategic plan. You well know that our strategic plan has
been succeeding and that there is every expectation that it will continue to
succeed. Contrary to your claim, we have disclosed significant elements of our
strategic plan in our SEC filings, in public advertisements and to our analysts
and shareholders. Our international, Gulf of Mexico, downstream and consumer
products initiatives are well known. We have delivered our plan to UPR in
litigation discovery. In contrast, UPR continues to withhold its strategic plan
from Pennzoil in litigation discovery. Your general counsel Joseph LaSala in a
sworn affidavit has said that UPR's own plan is "proprietary" and "secret" and
that UPR would be "irreparably harmed" by any disclosures of the plan. Under
the circumstances, how can you complain about our strategic plan in light of
your refusal to disclose your own plan? Finally, I am disappointed that you
continue to quote my alleged statement about Pennzoil's stock price over the
next four to five years. I never made that statement and I believe you know it.
Our Board of Directors has carefully and thoroughly reviewed
UPR's partial cash, partial stock proposal and rejected it because it is
inadequate and not in the best interests of Pennzoil and its shareholders. We
remain committed to the continued implementation of our strategic plan which
can deliver better long-term value to our shareholders and has more upside
potential than the UPR proposal.
Sincerely,
/s/ Jim
James L. Pate
