Pickens, Thomas Boone, Jr.

views updated


One of the best known and most skillful deal makers ever to emerge on the American scene, T. Boone Pickens (1928) 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 frontiersman Daniel Boone, and Gracee (Molonson) Pickens. Pickens' father was an attorney employed in the land acquisitions department of Phillips Petroleum Company when his son was born. "I was very fortunate in my gene (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.

Not long after he earned 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 $2500 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 that 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.

In the mid-1980s, Pickens was reported to be the highest paid corporate executive in the United States, 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.

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. His fortunes took a sustained tumble. The biggest blow came in 1996 when Pickens was forced to resign as head of Mesa after running up one billion dollars in debt, 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 protégé 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.

Pickens 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.

A key part of Pickens' strategy during the 1980s was his vocal, and often quite colorful, criticism of the U.S. corporate system. 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."

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 was done in the United States.

See also: Petroleum Industry


Current Biography Yearbook. New York: H.W. Wilson, 1986, s.v. "Pickens, Thomas Boone."

Nocera, Joseph. "T. Boone Pickens Gets the Boot at Mesa." Fortune, July 22, 1996.

Pickens, T. Boone, Jr. Boone. Boston: Houghton Mifflin, 1987.

Thorpe, Helen. "Reversal of Fortune." Texas Monthly, October 1995.

Willoughby, Jack. "Interview with T. Boone Pickens." Forbes, April 22, 1985.

pickens supported the then-revolutionary view that a ceo's major responsibility was to create wealth for his shareholders and that the failure to do so might well result in the loss of his or her job.