Refinancing deal at Mesa Inc. aggravates some shareholders

DALLAS -- Shareholders of Mesa Inc. approved a refinancing Tuesday that turns over control from T. Boone Pickens, the company's founder, to Richard Rainwater, a Fort Worth financier. But they did not go along peacefully.

A substantial number of shareholders voted against the refinancing, which greatly dilutes their own holdings.

In addition, shareholders refused to approve a 1-for-4 reverse stock split that management had recommended. Rarely do shareholders at any company vote down management proposals.

Rainwater will invest as much as $265 million on preferential terms that include control of the company.

His money and his presence are enabling Mesa to reduce its billion-dollar debt load and lower interest rates on the rest.

Rainwater has asked Pickens to step aside as chairman and chief executive, although Pickens will remain until Rainwater finds a replacement.

The loudest opposition to Rainwater's plans came from hostile investors led by David Batchelder, Mesa's former president and a Pickens protege.

While Batchelder and his billionaire confederates, Marvin Davis and Dennis Washington, were certainly not seen or heard at Tuesday's meeting, their influence was clear. In the Mesa proxy statement for Tuesday's voting, they said that Mesa was harming its shareholders by letting Rainwater invest too cheaply. The company has said that no alternative offer is as good.

Although the Batchelder group never reported holding as much as 10 percent of Mesa's shares, 19 percent of the shares voted Tuesday went against the terms of the Rainwater investment.

More than 71 percent went against the reverse stock split.

Management had recommended the split to make the shares more attractive to investors and brokers, many of whom avoid stocks priced as low as Mesa, which has traded between $2.625 and $5.50 the last 52 weeks. Mesa is based in the Dallas suburbs.

No shareholders spoke against the reverse split, but it apparently became a vehicle for protesting the broader plan.

Only one holder publicly attacked Rainwater's terms.

Otherwise, the meeting, held at a hotel banquet room here that was crowded with shareholders, investment bankers, lawyers and Pickens' friends, gave Rainwater a chance to introduce himself and his investment strategy.

Having decided that natural gas prices were ready to rebound, Rainwater said, he saw long ago that Mesa's prime properties and operations made the company a winning investment.

"The tide has changed in the oil and gas industry," he said."This company is perfectly positioned to take advantage of the opportunities."

Rainwater actually began courting Pickens four years ago. Not until Pickens' hostile investors and debts were catching up with him did he, earlier this year, agree to sell control to Rainwater.

Pickens plans to remain a director and significant shareholder.

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