A furious Pennzoil filed suit and started a bitter legal feud that lasted for the following four years, which pushed Texaco into bankruptcy, until a settlement of $3 billion, brokered by Carl Icahn, was reached. At the time, Cal Icahn, a noted corporate raider and financier, accumulated over 13% of Texaco's stock in a failed attempt to take control of the board.
However, the settlement, in which Icahn acted as a catalyst, removed the dark clouds hanging over Texaco and Pennzoil. As a result, both companies were able to move on and refocus on business. The resulting gains in stock prices also got Icahn some sizable financial windfall.
In the end, the biggest winners of all were the law firms, as Texas lawyer Joseph Jamail (whom Icahn mentioned in the video below) reportedly got $600 million for leading Pennzoil's attack against Texaco.
Here is a rare video of Carl Icahn recounting the event at Caroline's Comedy Club in Manhattan, New York. (Warning: a bit PG-13 at around 1:21 and the very end of the clip.)
Dian L. Chu
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About the author:
My name is Ben C. and I am 2nd year MBA candidate at the Anderson School of Business at the University of California- Los Angeles. I have a BS in Economics from the Wharton School of Business at the University of Pennsylvania. Before coming to Anderson I worked as a generalist equity research analyst for Right Wall Capital, a long-short equity hedge fund located in New York City. Prior to working at Right Wall I worked as an analyst at Blue Ram Capital, another long-short equity hedge fund located in Rye Brook, NY. This past summer, I worked for West Coast Asset Management as a research analyst. West Coast, which was co-founded by Kinko’s founder Paul Orfalea, is run by well-known value investors Lance Helfert and Atticus Lowe.