Raider Lieutenant Batchelder Strikes Out on His Own

David Batchelder isn’t afraid of a scrap. Take, for example, the time he took on his hometown of Bartlesville, Okla.

As the chief strategist for T. Boone Pickens in the mid-1980s, Batchelder helped orchestrate a surprise takeover attack on Bartlesville-based Phillips Petroleum Co. He pressed ahead even when the community fought back by distributing thousands of “Boone Buster” T-shirts, staging rallies and holding prayer vigils.

Batchelder’s older brother, a Phillips accountant, was harassed by pranksters who had pizzas delivered to his house at all hours of the day. The two sides eventually declared a truce, but some people in Bartlesville still harbor hard feelings.

Now that Batchelder heads his own six-person investment firm in La Jolla, things have changed somewhat. He’s no longer antagonizing entire communities, something he has done more than once. Still, Batchelder is girding for more takeover fights by launching a career as a corporate raider in his own right.

“I’m doing what I love to do,” he said.

His timing might seem a little strange. Junk bond financing is running dry, and hostile takeovers are going out of fashion.

But those who know Batchelder, an imposing, white-haired bulldog of a man at age 40, don’t expect him to be deterred. “He makes up his mind, and he moves in the direction he wants to go,” said Pickens, who was Batchelder’s boss for 10 years. “He doesn’t get distracted.”

Batchelder made his debut as a corporate raider last week by disclosing in a Securities and Exchange Commission filing that he leads a partnership planning to bid for Pic ‘N’ Save, a Dominguez-based close-out retailer. Batchelder’s group--which includes Robert J. McNulty, chief executive of the HQ Office Supplies Warehouse chain--said it has acquired 6.6% of Pic ‘N’ Save’s stock for $25 million.

For a man who helped make $700 million for Pickens on giant oil company raids and, more recently, more than $100 million for Los Angeles investor Marvin Davis on airline takeover bids, Pic ‘N’ Save would be a relatively small deal. But it clearly means more than that to Batchelder, who left his job with Pickens in Amarillo, Tex., two years ago to start his own firm.

“It’s really the first time he’s been the party out front with his own investment on the line,” said Joel L. Reed, an old friend and business partner of Batchelder who now is president of Insilco, a Fortune 500 manufacturing firm in Midland, Tex.

Even as Batchelder joins the ranks of big-time, multimillionaire players in the stock market, he retains some of the flavor of his small-town, middle-class Oklahoma upbringing. He is witty, friendly and sometimes jovial, but he also tries to avoid high-society parties and rarely plays golf or tennis.

When Batchelder isn’t working, he spends most of his time at his beachfront home with his wife of 18 years, Mary. He adopted, and is said to be very close to, the three children Mary had during her first marriage. With friends, Batchelder enjoys playing poker and gin, but he rarely risks more than $100 to $200 on a game.

“He hasn’t lost sight of the fact that $25 is a lot of money,” said I.T. (Tex) Corley, who worked for Batchelder at Mesa and now is an executive with a Houston environmental services firm.

During his days in Amarillo, Batchelder splurged on a red Corvette with a vanity license plate that read “Batch.” He now drives a Lexus, which he described as “an old man’s car,” and there appear to be no Ferraris or Jaguars in his future.

“If you met David out of the office, you’d never know he had a dime. He’d never tell you,” said Dyann Brown, who was Batchelder’s executive secretary in Amarillo and now is his office administrator in La Jolla.

Batchelder graduated from Oklahoma State University, and then joined what was the Big Eight accounting firm of Deloitte Haskins & Sells in Denver. After performing an audit on an energy company, he became intrigued by the oil and gas business and eventually decided to take a job at the Pickens operation now called Mesa Limited Partnership.

At Mesa, he rose through the ranks, eventually becoming president. More important, he emerged as a creative financial whiz and the deal maker behind a series of raids on such companies as Gulf Oil that eventually led to an overhaul of the U.S. energy industry.

Although the raid that drove Gulf into the arms of Chevron Corp. was Mesa’s most profitable takeover effort, some of Batchelder’s most difficult moments came in his company’s pursuit of Phillips.

Pickens, Batchelder and others at Mesa were caught off guard by the clamor that erupted in Bartlesville, the one-company town where Phillips reigns. But throughout the bitter takeover struggle in his hometown, Batchelder showed no sign of caving in. “If it did take a toll on David, he kept it pretty much inside,” Corley said.

Reed, who also worked with Batchelder on the Phillips bid, said the takeover fight “was very tough on him, but you never heard him complain. He never alluded to it, but you knew it was there.”

For his part, Batchelder said if he could have foreseen what happened in Bartlesville, he never would have gone ahead with the offer. Still, he said that Phillips and its shareholders are better off today for having been prodded into a reorganization. He also insisted that Mesa wasn’t just looking for quick stock market profits but genuinely wanted to acquire Phillips and would have kept its headquarters in Bartlesville.

Batchelder, with characteristic self-assurance, brushes aside criticism that hostile takeovers eliminate jobs and disrupt people’s lives. As he explained it, takeovers are just a way that troubled industries consolidate. An industry, he said, “has the same number of people that it’s going to have” whether an individual company slims down through takeovers or other means.

Bartlesville wasn’t the only town where Batchelder created a stir. When he left Mesa, Batchelder inflamed emotions in Amarillo by calling the city “a truck stop” and saying he wanted out. Today, Batchelder says that remark was partly intended to head off reporters’ questions about whether he and Pickens had a falling out, which both men deny.

Since setting up Batchelder & Partners in 1988, his biggest coups have come while serving as the principal adviser to Marvin Davis in his takeover bids last year for the companies that own Northwest Airlines and United Airlines. Although both bids failed, Davis walked away with hefty stock market profits.

Batchelder has also taken on much smaller deals, advising producer Daniel Grodnik and actor Tim Matheson in their takeover last year of National Lampoon Inc., the magazine publisher and movie producer. Last month, the company was sold again for $4.7 million in a deal handled by Batchelder, but Grodnik and Matheson are staying on as co-chief executives.

Although National Lampoon’s losses widened over the past year, Batchelder rejects the suggestion that the original deal was ill-conceived or that his clients were ill-prepared to run the company. Batchelder acknowledged that his two clients are “still learning” their jobs, but said he takes comfort in that the company’s shareholders, by accepting the takeover bid, endorsed Grodnik and Matheson.

Grodnik and Matheson--who played the role of “Otter” in the 1978 movie “Animal House”--say that the increased losses were expected in the early stages of their turnaround effort. They also bubble with praise for Batchelder.

“He’s got this charm,” Grodnik said. “He just sort of smiles at you and says we’re going to get this done, and that’s all you need to know.”

Batchelder, citing SEC restrictions on what can be disclosed in the course of a takeover fight, declined to discuss any details concerning the expected bid for Pic ‘N’ Save, a chain of 189 close-out merchandise stores. He has already invested more than $1 million of his own money in the effort.

Speaking in general terms, however, Batchelder maintained that there still is plenty of money to be made in the takeover business even as other corporate raiders are retreating. In Batchelder’s view, attractive companies are available at lower prices these days since junk bonds are no longer pumping up the stock market. At the same time, he said, there is more cash available for equity investments in takeover candidates because there are fewer deals available.

Batchelder said he will make it a practice in his takeover campaigns to team with partners who are well qualified to manage the target companies, so that he will be ready to run an operation when a bid succeeds. In the case of Pic ‘N’ Save, that partner apparently is McNulty, who is considered an innovative retailing executive.

The professional managers, however, will also be recruited to give the takeover bids legitimacy and to attract financing. In a candid admission, Batchelder said he normally figures he has no better than a 10% chance of actually acquiring a company that he “puts into play” in the takeover market. Much more often, he can make money by getting a takeover battle started and then bowing out to a higher bidder--the way Pickens made his fortune in takeovers.

Pickens, sounding like a proud mentor, said he isn’t surprised to see Batchelder making a splash for himself in the takeover business. “When he left, I knew we’d hear more from David,” Pickens said.