Pickens, T. Boone
Pickens, T. Boone
Mesa Royalty Trust
One of the best known and most skillful deal makers ever to emerge on the American scene, T. Boone Pickens rose to prominence during the 1980s as one of the decade's premier "corporate raiders." Colorful and outspoken, he combined uncanny business skill with the daring of a gambler as he launched one takeover attempt after another and shook up the oil industry in the process.
Thomas Boone Pickens, Jr., was born in the small town of Holdenville, Oklahoma on May 22, 1928. He was the only child of Thomas Boone Pickens, Sr., a distant relative of American frontiersman Daniel Boone, and Gracee (Molonson) Pickens. Pickens' father was an attorney employed in the land acquisitions department of Phillips Petroleum Co. when his son was born. "I was very fortunate in my gene—or genetic—mix," T. Boone noted in a 1985 Time magazine interview. "The gambling instincts I inherited from my father were matched by my mother's gift for analysis."
Around the mid 1940s, the family moved to Amarillo, Texas, where Pickens excelled in basketball at Amarillo High School. He then attended Texas A&M University on an athletic scholarship but transferred to Oklahoma State University after a broken elbow caused him to lose his financial support. Pickens received his bachelor's degree in geology from Oklahoma State in 1951 and subsequently went to work in the petroleum industry.
Pickens always demanded much of himself and routinely worked 12-hour days. He took great pride in being well organized and well informed about what was going on in the world. He has said that he has kept fit for years by playing tennis, racquetball, and golf and by working out daily in a physical fitness center.
Pickens has provided considerable time and money through the years to Oklahoma State University, the University of Texas Cancer Center, and a variety of public service organizations. He also served as chairman of the board of the M.D. Anderson Medical Center in Houston, Texas, as chairman of the executive committee of the Texas Research League, and as chairman of the board of regents of West Texas State University.
Pickens' first marriage to Lynn O'Brien produced three children. They divorced in 1971, and on April 27, 1972, Pickens married his second wife, Beatrice Louise Carr. They vacation frequently at one of their several homes, including a retreat in Palm Springs, California, that they consider their favorite.
Not long after earning his college degree, Pickens took a job as an oil geologist for Phillips Petroleum. He left in 1955, however, because he found the work boring and felt stifled by the company's conservative style. Pickens then started his own company, Petroleum Exploration Co., with $2,500 in cash, a $100,000 line of credit, and "an uncanny ability to find oil and gas," in the words of reporter Lydia Chavez of the New York Times.
Pickens focused his efforts on locating oil and supplying it to others. He managed to do this while avoiding the temptation to become involved with often costly sideline businesses such as pipelines, refineries, and service stations. By 1964 he had become successful enough to diversify some of his operations and incorporate. Thus was born Mesa Corporation, Inc., with headquarters in Amarillo, Texas.
By 1969, profits had reached the point where Pickens could afford to start buying out other companies. His first acquisition was Hugoton Production Co. and its vast natural gas field in Texas. The following year, he was rebuffed when he made a bid to take over Southland Royalty. In 1973, however, he added Pubco Petroleum to Mesa's holdings. In 1974 an ill-fated attempt to diversify into cattle cost him $19 million.
Pickens fared much better during the 1980s thanks to a combination of his astute business skills, his love of gambling, and sheer luck. Using a variety of techniques, including some that were not entirely aboveboard, he managed to accumulate a massive amount of cash by selling off some of his assets at just the right time and by buying and trading stock in other petroleum companies in a series of hostile takeover bids. Pickens also profited handsomely from the booming oil market during this decade. His shrewd deal-making netted him the Wall Street Transcripts "gold award" for the top executive in the oil industry in both 1981 and 1982.
Pickens' specialty was "greenmailing," which involved buying huge blocks of a company's stock as if preparing for a takeover, then selling them back at an inflated price so that the company can thwart the apparent buyout attempt. He first used this strategy in May 1982, when he tried to buy a controlling interest in a medium-sized oil firm called Cities Service Company. His efforts touched off a fierce bidding war among several oil industry rivals that drove up the company's stock price. Occidental Petroleum ultimately made the best purchase offer for Cities Service Company, but Pickens and Mesa shareholders still won big. By losing the bidding war, Pickens had strategically positioned Mesa to realize over $31 million in profit on the merger deal.
From that moment on, Pickens became a so-called "corporate raider," pursuing what many believed were authentic bids to assume control of large oil companies, especially ones he felt were being mismanaged and therefore less able to fight off a takeover. Time and again, he lost bidding wars only to win at the stock manipulation game. In 1984, for example, after a highly competitive struggle involving some of the oil industry's biggest names, Gulf Oil finally allowed itself to be purchased by Standard Oil Company of California to avoid being taken over by Pickens. The transaction resulted in the creation of a new oil company, Chevron, and Pickens and his partners walked away with a profit of $760 million.
An article in Business Week magazine reported that Pickens was the highest paid corporate executive in America, earning more than $20 million in salary and deferred compensations that year from his newly renamed Mesa Limited Partnership, Inc. His personal wealth was estimated at over $100 million.
But Pickens' reign as the "king of the corporate raiders" was short-lived. In 1985, he went after Unocal Corporation, which responded by offering a unique stock buy-back plan that was open to all shareholders except Pickens and his Mesa partners. Pickens sued in the Delaware courts to block the plan and received a favorable ruling. Then the Delaware Supreme Court reversed the lower court's decision and ruled that a company did indeed have the right to single out corporate raiders and treat them differently than other shareholders. Even though this decision was eventually overturned by the Securities and Exchange Commission, it marked the beginning of the end of Pickens' career.
In 1989, after becoming embroiled in a series of nasty political squabbles in Amarillo, Pickens moved Mesa's headquarters to Dallas. Since then, his fortunes have continued to take a tumble. The final blow came in 1996 when he was forced to resign as head of Mesa after running up $1 billion in debt as a result of overly generous payments to his shareholders. Pickens had bet that the price of natural gas would rise and bail his company out. But for once his gamble did not pay off, and Mesa suddenly found itself the target of raiders organized by a former Pickens protege named David Batchelder. Pickens officially stepped down as head of Mesa on December 31, 1996, but stayed on as a commodity market consultant for the company until late 1997 and then served as a member of the board of directors.
Social and Economic Impact
A key part of Pickens' strategy during the 1980s was his vocal, and often quite colorful, criticism of corporate America. He found many of the CEOs and managers he came in contact with to be greedy, careless, and ignorant about important aspects of their companies or their industries in general. He denounced the cushy perks these executives received and questioned their real value to the companies they headed. Instead, Pickens supported the then-revolutionary view that a CEO's major responsibility is to create wealth for his shareholders and that the failure to do so might well result in the loss of his or her job. It also infuriated him that a number of corporate leaders did not even own stock in the businesses they ran, meaning that they had little incentive to improve performance and thus increase stock values. And even those who did own stock in their companies, noted Pickens in a 1985 Forbes magazine article, "have no more feeling for the average stockholder than they do for baboons in Africa."
Chronology: T. Boone Pickens
1951: Went to work for Phillips Petroleum.
1955: Founded Petroleum Exploration Co.
1964: Incorporated as Mesa Corporation, Inc.
1969: Acquired Hugoton Production Co.
1973: Acquired Pubco Petroleum.
1981: Won Wall Street Transcripts "gold award" as top executive in oil industry for two consecutive years.
1983: Won Henry G. Bennett Distinguished Service Award.
1985: Became highest-paid corporate executive in America.
1996: Forced to resign as head of Mesa Corporation, Inc.
Such outspoken corporate-bashing made Pickens a hero to those "average stockholders." They applauded his efforts to shed light on inept management practices and were thrilled by the hefty returns they received on their investments as a result of his raids. In the end, Pickens opened more than a few eyes to the flaws in U.S. corporate culture and in no small way changed the way business is done in America.
Sources of Information
Contact at: Mesa Royalty Trust
712 Main St.
Houston, TX 79106
Business Phone: (713)216-6369
Businessweek, 6 May 1985.
Fortune, 26 December 1983.
Harper's Magazine, January, 1985.
Moritz, Charles, ed. Current Biography Yearbook, New York: H.W. Wilson, 1986.
Nocera, Joseph. "T. Boone Pickens Gets the Boot at Mesa." Fortune, 22 July 1996.
Thorpe, Helen. "Reversal of Fortune." Texas Monthly, October 1995.
Time, 4 March 1985.
Who's Who in America, 1984-85, s.v. "T. Boone Pickens."
Willoughby, Jack. "Interview with T. Boone Pickens." Forbes, 22 April 1985.
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