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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
(AMENDMENT NO. 21)
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. 21 (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
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EXHIBIT
NO. DESCRIPTION
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68 Letter to Shareholders of the Company from James L. Pate
dated September 15, 1997
69 Published advertisement of the Company dated
September 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: September 15, 1997 By: /s/ James L. Pate
James L. Pate
Chairman of the Board, President
and Chief Executive Officer
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EXHIBIT INDEX
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EXHIBIT
NO. DESCRIPTION
- ------- -----------
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68 Letter to Shareholders of the Company from James L. Pate dated
September 15, 1997
69 Published advertisement of the Company dated September 16, 1997
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[PENNZOIL COMPANY LETTERHEAD]
JAMES L. PATE
Chairman of the Board
Chief Executive Officer
September 15, 1997
Dear Fellow Shareholder:
I want to try to communicate with you as clearly as possible about
Union Pacific Resources' (UPR) hostile tender offer to acquire Pennzoil
Company. Also, I want to share with you some recently obtained information
about UPR that is startling.
By now, I believe everyone knows that on June 23, 1997, UPR made a
hostile tender offer for Pennzoil Company, offering $84.00 cash for just over
half of Pennzoil's common stock. UPR announced plans to acquire the other half
of Pennzoil Company's stock using UPR stock. Thus, the true value of the
current offer is very much dependent upon the value of UPR's stock, which is
complicated by UPR's use of price collars, a number of conditions, and now
recent revelations that the outlook for UPR is not as good as they have been
saying publicly.
Pennzoil Company's Board of Directors evaluated UPR's offer very
carefully. Pennzoil Company is not for sale, but the Board of Directors
understands its obligation to determine whether the interests of the company and
its shareholders would be better served by accepting the offer or by remaining
independent and pursuing our company's plans. The Board of Directors concluded
unanimously that Pennzoil Company's shareholders would be substantially better
off staying the course.
There were many reasons for the Board's decision as announced on July 1,
1997, and documents recently obtained from UPR further support the Board's
findings. These UPR documents were obtained on September 10, after UPR fought
tooth and nail for three months in two different federal courts to keep the
documents secret. UPR did not want you to see them because they speak of values
for Pennzoil Company much higher than its offer, about the positive trends at
Pennzoil and the dismal state of UPR's own business.
I would like to share with you just a few examples of UPR statements
from the internal documents it was finally forced to turn over to Pennzoil. UPR
has been saying PUBLICLY that everything at its company is rosy while in a sworn
submission to the Internal Revenue Service in 1996 and in other INTERNAL
documents they have been telling an entirely different story.
So, here are a few quotes from UPR's secret documents:
o "THE BASE LONG-RANGE PLAN . . . REFLECTS SIGNIFICANT NEGATIVE TRENDS
FOR [UPR]."
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o "CONSEQUENTLY, MANAGEMENT HAS CONCLUDED THAT [UPR] CANNOT MAINTAIN
ITS CURRENT LEVELS OF PRODUCTION FROM EXISTING PROPERTIES, AND THAT
ACQUISITIONS ARE NECESSARY TO DO SO."
o "[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 "[UPR]'S MANAGEMENT REFERS TO THE TREND OF STEEP DECLINES IN
PRODUCTION FROM EXISTING PROPERTIES AS THE 'VALLEY OF DESPAIR' AND TO
THE GOAL OF 10% GROWTH PER YEAR, IN SPITE OF SUCH DECLINES, AS
'WALKING UP THE DOWN ESCALATOR.'"
o "[UPR] WILL NEED TO ADD, THROUGH ACQUISITIONS . . . APPROXIMATELY
750 MILLION BARRELS OF OIL EQUIVALENT OR 4.5 TRILLION CUBIC FEET
EQUIVALENT OF GAS RESERVES -- AN AMOUNT SUBSTANTIALLY GREATER THAN
[UPR]'S CURRENT PROVED RESERVES."
These are UPR's own words taken from INTERNAL documents, that are in
clear contradiction to what they have been saying PUBLICLY. Aside from any legal
issues, these statements, which UPR was forced to disclose, certainly raise
questions about UPR's credibility and the true value of UPR's stock.
In contrast to UPR's INTERNAL bleak descriptions of their own business,
let me share with you what UPR says INTERNALLY about Pennzoil.
o "[PENNZOIL]'S STRONG PERFORMANCE IN 1996 MARKS A TURNAROUND FROM THE
COMPANY'S HISTORY OF LAGGING THE MARKET."
o "[PENNZOIL] HAS SIGNIFICANTLY OUTPERFORMED BOTH THE SMALL INTEGRATED
AND THE LARGE CAP INDEPENDENT EXPLORATION AND PRODUCTION COMPANIES
DURING 1996."
o "OVER THE LAST TWELVE MONTHS [PENNZOIL]'S VALUE HAS APPRECIATED
CONSIDERABLY COMPARED TO [UPR]'S."
Moreover, UPR's internal documents indicated that Smith Barney, UPR's
financial adviser, concluded that the net asset value of Pennzoil had almost
doubled from November 1995 to January 1997.
Consequently, in a high level UPR planning memorandum dated May 3, 1997,
UPR decided that it needed to launch its hostile tender offer quickly because,
in their own words:
"there is more likely good news than bad news for [Pennzoil] and a
rising stock price is ultimately their best defense. An early strike
would somewhat preserve the perception of our large current premium. The
existence of our offer would blur the market's perception of any
subsequent increase in stock price, for which we would naturally take
credit."
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Note, "blur the market's perception"--that means mislead Pennzoil
shareholders. And there is more. But what Pennzoil Company's Board of Directors
concludes from all of this is that UPR has some serious problems which it is
trying to solve cheaply with an inadequate bid that would capture for UPR the
long-term values of Pennzoil Company--all at the expense of Pennzoil
shareholders. UPR knows very well from the estimates of its own financial
advisers that even if their offer represented a GUARANTEED VALUE of $84.00 per
share, WHICH IT DOES NOT, it would be well below the inherent value of Pennzoil
Company and the upside value that Pennzoil can deliver to its shareholders in
the future.
I want to assure you that Pennzoil Company management continues focused
on financial performance and delivering shareholder value. Through the first
half of 1997, the company has had seven consecutive quarters of year-over-year
improvement in recurring earnings, and our cash flow has increased to an
annualized rate of $12 per share--a 30% increase over 1996 and one of the
highest in our industry. We look forward to further improvements in our
financial results in the second half of 1997 and the years ahead.
On behalf of your Board of Directors and management, I thank you for
your support.
Sincerely,
James L. Pate
Chairman of the Board
Chief Executive Officer
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EXHIBIT 69
SEARCHING FOR
TRUTH IN THE
'VALLEY OF DESPAIR'
We NOW understand why UPR is so desperate to take over Pennzoil.
Pennzoil is in the midst of a strong turnaround after a few hard years,
and UPR is -- in its own words -- in the "valley of despair." Unfortunately,
UPR's desperation has led it to deceive the public about its operations and
strategic plan.
On September 10, 1997, after fighting tooth and nail for three months
in two different federal courts to keep the public in the dark, UPR had no
choice but to release several internal UPR documents reflecting its views on
the dismal state of UPR's business. One of these documents is a sworn
submission to the IRS concerning UPR's business.
These UPR disclosures have NOT been previously made in any forum --
they have even been omitted from UPR's IPO prospectus issued in October 1995
and the SEC filings issued before and after UPR's spinoff. We think you'll
find these excerpts interesting reading -- as well as an object lesson in why
you can't trust UPR's management.
WHAT UPR TOLD YOU ABOUT
THEIR OWN PROSPECTS
o "UPR . . . is not running out of drill sites."
o "UPR expects to continue to have its volume grow at 10 percent a year."
o "UPR can achieve the goals it has set for itself without Pennzoil."
o "At UPR the Chalk is -- A Perpetual Profit Machine." UPR also claimed that
the "Chalk is forever."
WHAT UPR TOLD THE IRS
o "[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 "[UPR]'s management refers to the trend of steep declines in production from
existing properties as the 'valley of despair,' and to the goal of 10%
growth per year, in spite of such declines, as 'walking up the down
escalator.'"
o "Management has concluded that [UPR] cannot maintain its current levels of
production from existing properties, and that acquisitions are necessary to
do so."
o "There is significant uncertainty as to how much further the Austin Chalk
production can be economically extended."
IT'S ALL ABOUT VALUE.
PENNZOIL LOGO
