The Taking of Getty Oil

by Coll, Steve;

  “I can’t picture Gordon in control of Getty Oil,” Treves commented. “I’ll be in touch with you as soon as possible,” he added. Treves was cautious about discussing his reclusive client, Paul Jr. He gave no firm indication about whether Paul was prepared to go forward with a company-sponsored suit against his brother.

  Exhausted, the Getty Oil lawyers, bankers, and executives flew back to the United States that afternoon, some to New York, others to Philadelphia and Los Angeles. For the lawyers, the game-players, there was a self-conscious awareness that the London episode had raised the battle for control of Getty Oil to a new plane of exotic interest.

  “Who do you think will play Gordon in the movie version?” one lawyer asked his partner on the flight back.

  “I don’t know. Maybe Dudley Moore.”

  They laughed deeply and began to pretend that they were casting directors. Who could they sign to play Sid Petersen? Moses Lasky? Marty Lipton? If they had overheard this exchange, it is doubtful that Petersen, Copley, and the other Getty Oil career men would have shared the lawyers’ easy amusement. Increasingly, the company executives were like actors in a script produced not in Hollywood, but on Wall Street. And if that script was true to its genre, the executives knew, they would likely lose their company, their careers, and their professional identities in the final scene.

  That same day, but on a different flight, Tim Cohler and Tom Woodhouse were discussing a man who could easily play himself in any Hollywood version of Getty Oil’s troubles. His name was Martin Siegel, the investment banking whiz kid with the Wall Street firm Kidder, Peabody & Company. The night before, at the John Howard Hotel in London, Cohler and Woodhouse had tried to draw up a short list of investment bankers who might ably serve Gordon if he went ahead with his decision to sell the family trust’s 32 million shares of Getty Oil stock. They had discussed several names, but Woodhouse had been particularly enamored of Siegel, who was one of the best-known merger deal-makers in the country.

  One thing that distinguised Marty Siegel from, say, a Geoff Boisi, was his personal style. He was only thirty-five years old, possessed of stunning good looks and a brash, confident manner. He was regarded as one of the most aggressive merger bankers on Wall Street, renowned for what some bankers considered to be his unseemly, unsolicited approaches to large corporations. Siegel would contact a company’s chief executive, tell him that his corporation appeared to be vulnerable to a hostile raid, and then would offer a “defense” consultation against unwanted takeovers at the rate of about $125,000 per year. If the executive turned Siegel down, he had to worry that Kidder, Peabody would somehow make good on its warning by quietly putting his company into play on Wall Street. Siegel defended his consults as a perfectly legitimate marketing device, but to some the program smacked of a protection racket. Siegel took on dozens of defense clients at a time and Kidder earned $8 million annually from the program. More important, the defense consultations put Siegel on retainer at companies which, by Siegel’s own calculation, were likely to face a takeover bid. If a raid emerged, then Siegel was in a perfect spot to handle the deal and reap some of its huge transaction fees.

  Siegel earned more than $2 million annually in salary and bonuses and he lived lavishly and visibly. From his spectacular cedar-and-glass home on Long Island Sound in Greenwich, Connecticut, complete with swimming pool, tennis courts, gymnasium, and a private beach, he commuted daily to Manhattan by helicopter. He drove an Alfa Romeo, and before settling down with his second wife in the early 1980s, he was regarded as a kind of enfant terrible in Manhattan’s gilt-edged bachelor society. He talked eagerly to the press about his deals and his career—he was a prolific source for financial reporters at the major newspapers. When not reading about himself, Siegel preferred science fiction stories. As his friend Stuart Shapiro, a Wall Street lawyer, put it, Siegel was partial to tales with “a particular type of hero. They are young men of tremendous ambition and dashing looks who, by dint of their own efforts and the luck of the Lord, restructure the universe and change the course of history in some way.”

  It was an odd archetype for a man of Marty Siegel’s upbringing. He was raised in Massachusetts in a decidedly middle-class family; his father was in the shoe business. From an early age, he wanted to be an astronaut, and he figured that by the time he was old enough to qualify, the country would be looking not for test pilots, but for scientists to send into space. So, precociously brilliant, Siegel earned a bachelor’s degree in chemical engineering at the age of nineteen. After deciding that finance was more interesting than science, and having abandoned his plans to be an astronaut, he graduated as a Baker Scholar from the Harvard Business School at age twenty-three. Just ten years later, he was earning millions as the leading partner in Kidder, Pea-body’s merger division.

  Flying into New York from London that Wednesday afternoon, Cohler and Woodhouse agreed that Siegel would be their first choice to be Gordon Getty’s investment banker. Not only was Siegel regarded as one of the best merger bankers on the Street, he also possessed a reputation nearly equal to Martin Lipton’s and certainly comparable with Boisi and Goldman, Sachs’. In London, the big takeover guns had been hauled onto the deck. Gordon had decided to shop for one himself.

  Once in Manhattan, it took a series of urgent, cryptic telephone calls before Woodhouse and Cohler could gain an audience at Kidder, Peabody on Wednesday evening. Woodhouse told the firm that he could not reveal his client’s name over the phone, but he assured the Kidder bankers that it would be worth their while to grant a meeting. Finally, Cohler and Woodhouse were invited to see Peter Goodson, who was ostensibly Siegel’s boss in the Kidder merger division, but who earned significantly less money than his better-known subordinate.

  Cohler and Woodhouse sat down in Goodson’s office, located in Lower Manhattan’s dense financial district. Goodson was cordial but hardly ebullient. He had no idea what Cohler and Woodhouse wanted.

  “We asked for a meeting because we represent Gordon Getty,” Woodhouse began. “As you probably are aware, Mr. Getty owns about forty percent of Getty Oil Company’s stock, and—”

  Goodson held up his hand. “Excuse me for just a minute,” he said politely.

  He stood up and walked casually out of his office. Once safely around the corner, Goodson broke into a frantic half-sprint down the hallway. He reached Marty Siegel’s office, flung the door open, and announced “Siegel! Get out here! They’re Gordon Getty’s lawyers! Come on!”

  The sweet fragrance of wealth was all around them. Siegel scrambled out from behind his desk and trotted eagerly back down the hall with Goodson. As they approached his office, they slowed to a casual walk, wiped the excitement from their faces, and then stepped back in.

  “This is Marty Siegel,” Goodson said, making introductions. “I thought that he should join us.”

  Cohler and Woodhouse recounted the long, complicated history of Gordon’s relationship with Getty Oil management and the museum. They described the occasion of their visit—the negotiations in London, and the entrance of Martin Lipton. Siegel knew Lipton well; they had worked together frequently in hostile takeover battles. The two lawyers asked Siegel if he would be willing to work with Gordon Getty, possibly on the sale of his stock, possibly on some other course of action that Mr. Getty might devise. Siegel said that he would be pleased to do so. They worked out a fee arrangement under which Kidder would be paid several hundred thousand dollars cash immediately, for consulting and advising by Siegel, plus three-eighths of 1 percent of any future transaction involving the trust’s shares. Under that formula, if the entire company was sold, Siegel would garner more than $10 million for his firm.

  Siegel also agreed to meet briefly with Gordon while he was in New York. At that meeting, asked about his objectives, Gordon did not instruct Siegel to sell the trust’s shares, the course he had apparently decided upon in London. Instead, he told Siegel the same thing that he had told everyone else who asked him what he wanted.

 
“I want to maximize the trust’s value,” Gordon said.

  Siegel replied that he would quickly analyze Getty Oil’s assets and the restructurings considered earlier that year by the company, and then he would fly to San Francisco to present Mr. Getty with his findings. Siegel also said that he would like to review the “black books” on Getty Oil’s finances prepared by Goldman, Sachs earlier in the year, and he asked Gordon’s lawyers if they could make the arrangements with Goldman. They said they would try.

  It was not until the following Monday that Tim Cohler finally spoke with Bart Winokur about the retention of Marty Siegel and Siegel’s request to see the earlier Goldman studies.

  “We assume that you would think hiring Siegel is a good idea,” Cohler said.

  “Has Gordon made up his mind about whether he’s going to sign the standstill?”

  “He has not made a final decision,” Cohler replied. “At this point, he is not signing the standstill, but he might decide to later. You should be assured, however, that Mr. Getty is not going to take any precipitous action until after he has reviewed the situation fully with Mr. Siegel and has had his advice.”

  Soon after hearing from Cohler, Winokur traveled by train to New York for a meeting with Geoff Boisi and Marty Lipton. When they had left London the previous Wednesday, the three of them agreed to negotiate a two-way standstill agreement between the company and the museum, even if Gordon was unwilling to go along. Winokur and his partners in Philadelphia had already begun to draft a formal document—their version was long, complex, and filled with detailed clauses. It was lawyerly. Lipton had seen a copy of the draft, and he had told Winokur that he thought it was “unseemly.” There was too much fine print, Lipton said. A truce, by nature, must be basic and simple. Winokur, in his draft, seemed to anticipate every possible nefarious move that his opponents might conceivably make, Lipton said. Winokur replied that he was only trying to be thorough. They scheduled a meeting in Lipton’s Midtown offices to talk things over.

  Inevitably, the conversation turned from Winokur’s drafted agreement to Gordon’s decision to retain Kidder, Peabody. Geoff Boisi had by now spoken with Siegel about the Goldman, Sachs black books.

  “Marty is busy reviewing all the materials,” Boisi told Lipton and Winokur. “He told me that they were trying to figure out what it was that Gordon was interested in and that they have not figured that out yet, what his objectives are. So they’re going to explore some alternatives, including some of the alternatives we already studied, and then present their conclusions to Gordon.

  “My impression is that Marty might be in contact with outsiders who might be interested in acquiring Getty Oil,” Boisi continued. “I think Marty might be trying to build some alliances with outsiders. That might be a great threat not only to the company, but to the museum, too. The museum could find itself out in the cold. But I don’t know that for sure. I just got that feeling from Marty.

  “Marty, as you know, has a tendency, when he gets involved in these things, to look for the deal and the fee on the deal,” Boisi concluded.

  “I know that, but that doesn’t mean he’s going to do that here,” Lipton said.

  “Yes, but we certainly have to be concerned about that,” Boisi replied.

  “I agree,” Lipton said.

  Even among friends, Marty Siegel’s aggressive reputation preceded him. Siegel was a deal-maker, an instigator, Boisi and Lipton knew. Of course, Boisi and Lipton were not exactly reluctant to pick up multimillion dollar merger fees for themselves. But in their own minds, Siegel was dangerously aggressive. They had to be careful about what Marty might do.

  Over the next two weeks, then, a new level of gamesmanship took hold. It was no longer simply that the advisors were ascendant over the affairs of Getty Oil Company. Now, with the entrance of Lipton and Siegel, the company’s destiny had passed irretrievably to Wall Street. Not even the contentious negotiating between Winokur and the Lasky firm was consequential anymore; the important talks now involved Boisi, Lipton, and Siegel, the merger men, the mercenary warriors in New York who had battled each other before over companies long forgotten, and who would contend again when the Getty Oil deal was done.

  There was a collegial feeling among those three that outsiders might not understand, a sense perhaps not of arrogance, but at least of potency and confidence. The era of the hostile takeover in American finance was nearing a stage of maturity; the game was no longer fresh, and prominent players like Lipton, Boisi, and Siegel had shed their early exuberance. Lipton, for example, now expressed doubts about the effects of merger mania on the long-term health of the country’s economy, this despite the personal fortune he had made during its halcyon days. He even drafted legislation and testified before Congress, urging that restrictions be imposed on corporate raiders such as Boone Pickens, Carl Icahn, and Irwin “The Liquidator” Jacobs. Lipton’s critics, and there were plenty of them, decried the hypocrisy of his sudden moralizing about takeovers. At a more personal level, merger maestros such as Lipton, Boisi, and even the ambitious Siegel, had by the fall of 1983 settled into a steady, quiet professional routine. Siegel and Lipton were recent fathers, Boisi a family man of longer standing. In comparison to the average corporate manager, all three still worked grueling, stressful hours, but they were no longer quite so excitable, so driven as they had been during those wild, trailblazing takeover campaigns during the 1970s. With experience had come confidence and also friendship. Now, if a problem such as the dissension and uncertainty at Getty Oil arose, they could sit down together and talk about it, rationally, calmly. There was no need to start a war preemptively.

  And so the three of them, and Bart Winokur, too, began to feel each other out about the problems at Getty Oil and how they ought to be resolved. In the two weeks following the London meetings, Lipton was in the middle, talking freely with Siegel on the one side and Boisi and Winokur on the other. To all of them, he insisted that an eighteen-month standstill was the only sensible course, and he hoped that Gordon and the company would agree to join the truce. With Winokur, Lipton continued to discuss the long standstill draft prepared by Dechert Price & Rhoads. Lipton insisted that Dechert’s approach was too complex. Besides, he said, Gordon would never go for Winokur’s draft. By Monday, October 17, Lipton began to talk with Siegel about a trip to San Francisco where all the parties could meet to negotiate a standstill. With Siegel’s assistance, an all-day meeting was set for Wednesday, the nineteenth, at the Lasky firm’s offices. Lipton suggested that he and Siegel fly to California together so they could spend a few hours on the plane discussing the provisions of a new, three-way standstill document.

  Despite Lipton’s speeches in London about the “absurdity” of Gordon’s takeover proposal to the museum, and despite the heart-to-heart at Claridge’s between Williams and Petersen, which had been designed to clear up the suspicions between them, Getty Oil’s management and advisors remained dubious about the seemingly benign intentions professed by Marty Lipton. When Winokur, Boisi, and Petersen heard that Lipton and Siegel were flying to California together, they were concerned. The presence of Siegel might make a joint takeover between Gordon and the museum more palatable to Lipton and Williams. The company advisors could imagine the two Martys, Lipton and Siegel, stepping off the plane in San Francisco, shaking hands, and then advising their clients that they had agreed to take control of Getty Oil. There was a comity between Lipton and Siegel, a long history of treacherous deals skillfully negotiated. Petersen and his advisors decided that they had to proceed with caution.

  On Wednesday, the nineteenth, Petersen flew to San Francisco from Bakersfield, California. Since his return from London, the Getty Oil chairman had been immersed in a series of annual company budget and planning meetings that were held at regional headquarters around the country. In fact, because of his intercontinental travel, Petersen had missed a couple of important sessions, and Bob Miller had been forced to chair the meetings. After returning from London, Petersen rejoined h
is top executives in Salt Lake City, offering no explanation for his highly unusual absence. From Utah, he had moved on to the regional headquarters at Bakersfield. On Wednesday, he was again forced to skip an important budget meeting because of the negotiations in San Francisco. Increasingly, Petersen was slipping away from involvement in the day-to-day affairs of his company.

  Morning broke warm and clear across San Francisco Bay that Wednesday. Siegel arrived early at the Lasky offices on Sansome Street in order to meet with Gordon and his lawyers before Williams, Petersen, and their advisors arrived.

  “My conversations with Marty Lipton on the flight out were very productive,” Siegel reported to Gordon, Cohler, Woodhouse, and Lasky. “We agreed on an outline for a possible standstill agreement. Marty is going to recommend it to Harold Williams.

  “I think there is a very substantial identity of interests between the museum and the Getty family trust,” Siegel went on. “I think Williams and Lipton are of the same view as Gordon on most of the important matters. Lipton thinks that the attitude of the company’s lawyers is high-handed, and he is willing to go pretty far to work around that and to keep management from screwing things up some more.”

  “I’m not surprised to hear that,” Gordon said. “I have great confidence in Mr. Williams. I’ve been confident throughout this that Harold and I would see eye to eye on the important points.”

  There were two conference rooms among the Lasky firm’s twelfth-floor offices. When Petersen, Williams, and their advisors arrived early that afternoon, separate camps were established. Petersen, Winokur, Boisi, and Galant were shown to one conference room; Williams, Lipton, and the Lasky lawyers to the other. Over the next few hours, a number of small negotiating caucuses convened.

  First off, Gordon and Sid Petersen met privately in an unoccupied office. It was their first face-to-face encounter since Pebble Beach.