Don't cry for me, Amarillo

How once-fearsome corporate raider T. Boone Pickens was beaten at his own game -- by a one-time protege

Although Batchelder, as an outsider, wasn't privy to the details, his intuitions were right. Pickens was beginning to think about selling something to pay off his debts. But not the whole company.

In November 1994, Pickens had received an offer for the Hugoton Properties. His plan was to sell off Hugoton -- the crown jewel of the Mesa assets, representing about one-third of the company's holdings -- use the cash to pay off the debts and preserve the rest of Mesa.

Contour Production of Houston, a private oil and gas company headed by former Shell Oil president John Bookout, had offered $900 million for Hugoton Properties. But in a move that seems utterly mistaken in hindsight, Pickens rejected the offer as too low.

In December 1994, Batchelder told Pickens that a Batchelder client -- Dennis Washington -- was about to acquire more than a $15 million stake in Mesa. At that same meeting -- the first face-to-face encounter between the two men in seven years -- Batchelder told Pickens he should sell the company. Pickens reacted with alarm.

"Hell, David, that isn't even being considered," Pickens said, according to an account of the conversation from court documents published in Texas Monthly.

But with the increased pressure from Batchelder's investors, Pickens began systematically shopping for buyers for the Hugoton property, and in January 1995 announced that Mesa would auction off the huge gas reserve.

Initially Pickens expressed confidence about his prospects. He didn't bother, for instance, to hire investment bankers to market the property. "He didn't think he needed them, and he wanted to control the deal," says a Mesa shareholder who follows the company closely and talked to Pickens at the time. He remembers Pickens was heard bragging immediately after the auction was announced, "Hell, I got 40 calls on my desk."

But the buoyant mood was short-lived. The auction kept dragging on as Pickens scrambled to find someone who would offer $1 billion for the property.

In the meantime, Batchelder's group gained ground.
The group connected with a powerful ally, Marvin Davis, a dealmaker with a reputation for fierce fighting. With the auction going poorly and Batchelder threatening to go to shareholders for a vote, Pickens agreed reluctantly in March 1995 to give the outsider group two seats on the Mesa board -- one to Batchelder and one to an executive working for Washington's company.

Then came worse news for the Mesa founder. On June 9, 1995, Pickens had to announce that the auction had been a failure. The highest bidder, Mobil Oil Company, had offered only $750 million, not enough to pay off a significant amount of the debt and save the rest of Mesa.

By July 1995, Pickens began constructing his corporate defenses. Ironically, he employed the very tactics -- such as poison pills and golden parachutes -- that had once earned his scorn when other CEOs were running from him.

Pickens directed Mesa to file suit against Batchelder and his investors, always a good stalling tactic in a takeover battle. In the suit, which cost the company at least $1 million in litigation fees, Mesa alleged that Batchelder's investors had disregarded SEC rules and failed to disclose their joint holdings. Batchelder's investors, the Mesa suit contended, had been secretly working together without disclosing their cooperation.

Three days after filing that suit, Mesa's board adopted a poison pill. It called for any party's acquisition of more than 10 percent of Mesa's stock to trigger a provision allowing other shareholders to buy stock at half price, diluting the value of all the shares. The board also approved golden parachutes for Mesa executives. Initially, even Pickens was scheduled to get a double-salary deal if there were a change in control. But when Batchelder and other board members squawked, Pickens quickly took his name off the list.

Batchelder's group returned the fire by filing a countersuit to invalidate the poison pill.

In September 1995, the two sides settled the litigation -- a move that bought Pickens some time. The pact called for Mesa's board to do something -- find a buyer, find cash or whatever -- to resolve the debt issue. In return, Batchelder's group pledged not to conduct a proxy fight. Batchelder also agreed to resign from the Mesa board and send his partner, Joel Reed, to the meetings instead. Banishing Batchelder was a Pyrrhic victory for Pickens, and both sides pledged to refrain from making disparaging comments to the press.

"[Pickens] just didn't want to see Batchelder's face," says one former Mesa employee.

For Batchelder's investors, the settlement set a date by which Pickens had to make a deal to improve Mesa's outlook or face the renewed threat of a Batchelder-led takeover.

On February 27 of this year -- two days before that deadline -- Pickens found a way out. He presented his board with a plan offering Richard Rainwater effective control of the company, giving Rainwater 33 percent of new Mesa stock for $2.26 a share, about a 25 percent discount on the market price. In exchange, Rainwater made a $265 million cash infusion -- which subsequently helped Mesa line up lower-cost financing for its debt.

Pickens, as he has grudgingly conceded, had run out of time. He did not want his company's fate determined by Batchelder. And Rainwater was there waiting.

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