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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
(AMENDMENT NO. 33)
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:
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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
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This Amendment No. 33 (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 ("Pennzoil"
or the "Company"), relating to a tender offer commenced by Resources Newco,
Inc., a wholly owned subsidiary of Union Pacific Resources Group Inc. ("UPR"),
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
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EXHIBIT
NO. DESCRIPTION
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96 Press Release of Pennzoil dated October 15, 1997.
97 Published advertisement of Pennzoil dated October 16,
1997.
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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: October 16, 1997 By: /s/ James L. Pate
James L. Pate
Chairman of the Board, President
and Chief Executive Officer
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INDEX TO EXHIBITS
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EXHIBIT
NO. DESCRIPTION
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96 Press Release of Pennzoil dated October 15, 1997.
97 Published advertisement of Pennzoil dated October 16,
1997.
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[PENNZOIL LETTERHEAD]
FOR IMMEDIATE RELEASE
CONTACTS:
Robert Harper Joele Frank/Brian Faw
Corporate Communications Abernathy MacGregor Group
713/546-8536 212/371-5999
PENNZOIL SENDS LETTER TO SHAREHOLDERS
SAYS UPR IS TRYING TO SOLVE ITS PROBLEMS AT THE EXPENSE OF PENNZOIL SHAREHOLDERS
Houston, TX, October 15, 1997 -- Pennzoil Company (NYSE: PZL) today sent the
following letter to its shareholders informing them that Pennzoil's Board of
Directors unanimously rejected Union Pacific Resources Group Inc.'s (NYSE: UPR)
hostile tender offer as inadequate and not in the best interests of Pennzoil
and its shareholders.
In the letter to shareholders, James L. Pate, Pennzoil Chairman and Chief
Executive Officer, said "UPR is seeking to usurp for itself the future growth
in revenues, net income and cash flow and stock price appreciation that are
only beginning to result from Pennzoil's completed cost-cutting efforts and
operational improvement and Pennzoil's pending and completed strategic
initiatives . . . allowing UPR, in an effort to solve its own problems, to
capture the tremendous inherent and upside value of Pennzoil stock for an
inadequate price."
The full text of the letter to Pennzoil Shareholders follows:
Dear Shareholder: October 14, 1997
On October 7, 1997, Union Pacific Resources Group Inc. (UPR) revised the
tender offer it commenced three and a half months ago by changing it to
an offer to acquire all of Pennzoil's shares for $84 per share in cash.
Under UPR's proposal, shares not acquired in the tender offer would be
cashed out in a subsequent merger for the same $84 cash consideration.
Although the revision to UPR's offer eliminates the coercive two-tier,
front-end loaded structure of its original proposal, the revised offer
remains, in the view of your board of directors, inadequate and not in
the best interests of Pennzoil and its shareholders. Accordingly, your
Board of Directors recommends that you reject UPR's revised proposal and
not tender your shares pursuant to UPR's offer.
Your Board of Directors believes that the revised UPR offer does not
reflect the long-term values inherent in Pennzoil and that the interests
of Pennzoil and its shareholders will best be served if Pennzoil remains
an independent company and continues pursuit of its own strategic
initiatives and projects.
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Moreover, your Board of Directors believes that the revised UPR offer poses a
threat to Pennzoil's shareholders in that UPR is seeking to usurp for itself
the future growth in revenues, net income and cash flow and stock price
appreciation that are only beginning to result from Pennzoil's completed
cost-cutting efforts and operational improvement and Pennzoil's pending and
completed strategic initiatives included in Pennzoil's strategic plan.
In arriving at its determination regarding UPR's revised offer, the Board of
Directors gave careful consideration to the factors described in the
accompanying amendment to Pennzoil's Schedule 14D-9. The Board also reviewed
updated opinions of Lehman Brothers Inc., Evercore Group Inc. and J.P. Morgan
Securities Inc., Pennzoil's financial advisers, that the consideration to be
received by Pennzoil's shareholders pursuant to UPR's revised offer is
inadequate from a financial point of view. We urge you to read the enclosed
amendment to the Schedule 14D-9 in its entirety.
Pennzoil's consistently strong recent performance is solid evidence of
Pennzoil's turnaround. Pennzoil's record of progress and continued improvement
is unambiguous. Pennzoil has had seven consecutive quarters of year-on-year
recurring earnings improvement through the second quarter of 1997, with
recurring earnings up 118% to $2.04 per share in the first half of 1997.
Earnings are on track to continue this trend through the third quarter as well.
Pennzoil's cash flow has increased significantly, from $6.49 per share in 1995
to $9.31 per share in 1996, and is expected to exceed $12.00 per share in 1997.
Pennzoil's recently completed refinery projects are already generating an
expected $1 per share of cash flow in 1997 and even more is anticipated in 1998
and beyond. Pennzoil has cut G&A by $80 million since 1995, and reduced per
barrel operating costs at the oil and gas segment by 17% since 1994.
Pennzoil delivered a total return of 42% to its shareholders--outperforming the
E&P sector and more than doubling UPR's total return to shareholders--from
October 1995 through June 20, 1997 (the last day of trading before the
initiation of UPR's hostile tender offer). Stocks in the E&P sector have risen
significantly since June 1997, when UPR's offer was first announced. Thus, even
though Pennzoil outperformed the E&P sector from October 1995 to June 1997, if
you assume only that Pennzoil performed in line with the E&P sector since June,
Pennzoil's stock would have increased by 20% or more, constituting a
significant portion of the so-called "premium" being offered by UPR.
Pennzoil has built a high-potential, worldwide oil and gas portfolio in
prolific hydrocarbon producing basins, like the U.S. Gulf of Mexico, Qatar, the
Caspian Sea, Egypt, Venezuela and Australia. The enormous value of this
portfolio--a portfolio that will substantially increase the Company's proved
reserves and create significant shareholder value--is just beginning to be
tapped. This portfolio includes: in the Caspian Sea, a 4.8% carried interest in
the giant Azeri-Chirag-Gunashli project, where there are estimated recoverable
reserves of at least 4.7 billion barrels of oil, as well as a 30% interest in
the Karabakh project; in Egypt, five prospective concessions covering 9.2
million acres in hydrocarbon charged basins; in Qatar, Block 8, where drilling
is underway on the second of four exploration wells; in Venezuela, three
producing
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blocks in one of the most exciting oil producing regions in the world; in
Australia, a promising exploration project being drilled in the Whicher Range,
south of Perth, where Pennzoil has a 44% working interest; and in the U.S. Gulf
of Mexico, over 150 blocks in one of the most prolific areas in the U.S. to
explore for and produce crude oil and natural gas, and where Pennzoil
continues to be one of the most active drillers.
As you may have read, litigation discovery has revealed estimates by UPR's own
financial advisers that show valuations for Pennzoil considerably in excess of
$84 per share. As you may not yet know, UPR has admitted to withholding from
Pennzoil and the public additional UPR valuations of Pennzoil in excess of $84
per share, which a court has ordered UPR to produce. Moreover, UPR's own
documents state that Pennzoil has undergone a "turnaround" and has
"outperformed" other E&P companies since early 1996 and correctly predicted
that there is "more likely good news than bad news" for Pennzoil.
UPR claims that it can achieve better results from Pennzoil's properties by
applying its own drilling model to them. We believe UPR's "drilling machine"
strategy is a strategy borne out of necessity by reason of UPR's overexposure
to the Austin Chalk, where steep decline curves demand an extremely rapid
drilling strategy. Pennzoil, with its diverse operations onshore, offshore and
in international areas, has experienced management far more familiar with
Pennzoil's properties than UPR, and fully capable of developing and implementing
the best strategy for exploiting Pennzoil's existing assets, growing Pennzoil's
production and reserve base and delivering the value inherent in Pennzoil to
Pennzoil shareholders.
in its considerations, the Board of Directors also noted that, although UPR's
offer is not by its terms subject to any financing contingency, UPR does not
have any commitments for the financing that would be necessary for it to
purchase shares pursuant to its revised offer, and therefore its willingness
and ability to finance this significant all-cash transaction is still in doubt.
UPR's refusal to pay the fees necessary to secure financing raises questions
about the seriousness of its offer.
We remain committed to staying on the course Pennzoil has set for itself. That
course is not consistent with allowing UPR, in an effort to solve its own
problems, to capture the tremendous inherent and upside value of Pennzoil stock
for an inadequate price. We urge you not to tender your shares to UPR. If you
have already tendered, we urge you to withdraw your shares.
On behalf of the Board of Directors,
/s/ JAMES L. PATE
James L. Pate
Chairman, President and Chief Executive Officer
Pennzoil Company explores for and produces crude oil and natural gas,
manufactures and markets premium quality lubricants, including America's top
selling motor oil, and is the parent company of Jiffy Lube International, the
world's largest franchiser of fast oil change centers.
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TO ALL PENNZOIL SHAREHOLDERS:
THE PENNZOIL TURNAROUND
IS WELL UNDERWAY....
Here are the facts:
o Pennzoil has had seven consecutive quarters of year-on-year recurring
earnings improvement through the second quarter of 1997, up 118% to $2.04 per
share, in the first half of 1997. Earnings are on track to continue this
trend through the third quarter of 1997, as well.
o Pennzoil's cash flow has increased significantly, from $6.49 per share in
1995 to $9.31 per share in 1996, and is expected to exceed $12.00 per share
in 1997.(1)
o Pennzoil delivered a total return of 42% to its stockholders -- outperforming
the E&P sector and more than doubling UPR's total return to stockholders --
from October, 1995 through June, 1997.(2)
o Pennzoil has consistently outperformed the E&P sector. Had Pennzoil only
performed in line with the sector since the UPR offer in June, its stock
would have increased an additional 20% or more, constituting a significant
portion of UPR's so-called "premium."
o Pennzoil has cut G&A by $80 million since 1995, and reduced per barrel
operating costs by 17% since 1994.
o Pennzoil's recently completed refinery projects are already generating an
expected $1 per share of cash flow in 1997 and even more is anticipated in
1998 and beyond.
o Pennzoil has built an exciting worldwide portfolio of oil and gas projects in
regions that hold great potential like the U.S. Gulf of Mexico, Qatar, the
Caspian Sea, Egypt, Venezuela and Australia.
These facts demonstrate that UPR's offer of $84 is inadequate. Indeed, UPR's
own confidential internal studies similarly arrived at valuations for Pennzoil
well above $84 per share. Even UPR has commented favorably on Pennzoil's
turnaround.(3)
DON'T LET UPR TRY TO SOLVE ITS PROBLEMS
AT THE EXPENSE OF PENNZOIL SHAREHOLDERS.
IT'S ALL ABOUT VALUE.
[PENNZOIL LOGO]
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(1) Based on first half 1997 cash flow of $5.95 per share.
(2) Bloomberg Financial Markets (from UPR's Initial Public Offering in October,
1995 through June 20, 1997, the last trading day prior to UPR's
announcement of its tender offer).
(3) "[Y]ou have done a superb job of turning around the company. You have it on
the right path." Project Mercury Briefing Report, a confidential internal
UPR document dated May 3, 1997 (page 21-0063).
