Aircraft giant Boeing wonders what Boone Pickens wants
T.Boone Pickens, the Texas oilman and crafty corporate raider, has caused a collective shiver to run through the top management of Boeing, the giant aircraft manufacturer. Mr. Pickens has reportedly purchased more than $15 million of Boeing stock, which seems to many Wall Street investors sufficient proof the wily investor has a takeover ace up his sleeve.
Investors jumped on the Boeing bandwagon along with Pickens Tuesday, sending the stock soaring $7.50, to $53.
A major defense contractor, Seattle-based Boeing is using its clout in the Washington Legislature to lobby for anti-takeover legislation. There is also speculation the company could get the military to block a takeover for ``national-security reasons'' if such a move threatened the continuity of defense programs.
Many stock analysts, however, are skeptical that Pickens really wants to grapple with Boeing - an $8 billion company that would cost $12 billion or more to conquer, since Boeing would mount a costly defense. Most believe Pickens is just making a smart move on an undervalued stock.
Uncertainty has made the stock jump and provided more than enough incentive for Boeing management to adopt a ``poison pill'' anti-takeover defense.
Some think Pickens's move could put Boeing in play, making it ripe for the picking by Ford or General Electric.
Others believe management might be forced to buy back stock, restructure the company, or in some other way distribute cash to stockholders to satisfy them.
``Boeing is taking the threat very seriously,'' says Paul H. Nisbet, an aerospace analyst at Prudential-Bache Securities. ``They don't want to get caught napping.''
If Pickens were to make a run at the world's leading aerospace company, it is fairly certain Boeing would use all its financial muscle to make the fight long and hard.
``Its management is fiercely independent,'' Mr. Nisbet says. ``I think they would do anything to stay independent.''
Other analysts say Pickens needs the money and is trying to make a nice stock play. His oil company, Mesa Limited Partners, is committed to distribute $2 a share to its common-stock holders.
But the cost of doing so is considerably more than the company is gaining from sales of oil and gas. Pickens has made several large stock plays in recent months.
``For Pickens it's just normal investing; for others, people automatically assume he is targeting the entire company,'' says Philip Erlanger, a technical analyst with Advest, a Hartford, Conn., brokerage.
``I can certainly see why he'd consider Boeing an investment tool, especially when others see him buying the stock and they invest too.''
Though sales are impressive, Boeing's earnings are in a down cycle because of heavy research and development, overseas competition, and other costs. France's Airbus Industrie has been competing hard, cutting into Boeing's earnings and causing it to lag the market considerably.
Yet, the long-term outlook (18 months to three years) is bright, since Boeing has nearly $30 billion in back orders and more than $3 billion in cash - cash Pickens might have his eye on as a way to finance a takeover. Both factors are reasons Boeing stock has been viewed as undervalued recently.
Though a takeover of an aerospace company would be out of character for him, Pickens has been talking for a while about venturing outside of big oil.
``I have have always believed that it's important to show a new look periodically,'' said Pickens in his recently published autobiography. ``Predictability can lead to failure.''
Though few would accuse the poker-faced Pickens of being predictable, most analysts are saying they just don't see him making a grab for Boeing.
``He's not going to go for Boeing,'' says Rosario Ilacqua, an oil analyst with Nikko Securities.
``I just don't believe that. It'd be a contradiction of everything Boone has said. He thinks diversification is baloney. Who's going to fool around with Boeing - Boeing's a great company.''