Pickens Group Says It May Seek to Control or Restructure Unocal

Texas oilman T. Boone Pickens turned up the heat in his long-simmering battle with Unocal Corp. by announcing Thursday that the partnership that he heads may seek control or try to force a restructuring of the Los Angeles-based parent of Union Oil Co. of California.

The Mesa Partners II investor group, which Wednesday increased its stake in Unocal to 13.6% from 9.8%, said it will attempt to postpone Unocal’s scheduled April 29 annual meeting for two months.

If it is successful, the group said in a 41-page filing with the Securities and Exchange Commission, it may attempt to elect its own slate of directors at the reconvened annual meeting, which Mesa is proposing be set for June 28. Only three of Unocal’s 13 directors are up for reelection in April, but one of those directors is Unocal Chairman Fred L. Hartley.

The investor group hasn’t decided yet what it will do with its 23.7-million-share investment in Unocal stock, Mesa Partners said in its filing.

Possible Restructuring

Mesa Partners said its alternatives include buying a controlling interest in Unocal or proposing a restructuring of Unocal that could involve repurchasing company shares, a recapitalization of the company or a sale or distribution of company assets. Or, the partnership said, it could decide not to submit a plan to shareholders or could sell its Unocal stock.

Mesa said it plans to talk with potential lenders and investors about the possibility of obtaining additional financing. Mesa already has spent $1.1 billion of the $1.2 billion that the group said it intended to spend on Unocal stock when it revealed its first, 7.9% stake on Feb. 14.

Wall Street reacted favorably to the move. Unocal shares were the most actively traded issue on the New York Stock Exchange on Thursday, closing at $49.50, up $1.875, as 3.43 million shares changed hands. Unocal was also the volume leader on Wednesday as a result of a 7-million-share block, most of which was acquired by the Mesa group.

No spokesman for Mesa Partners could be reached for comment. Mesa Partners II is composed of a subsidiary of Amarillo, Tex.-based Mesa Petroleum Co. and Wagner & Brown, a Midland, Tex.-based general partnership. Pickens is chairman of Mesa Petroleum.

Unocal declined comment on the announcement.

But, in February, Hartley declared that Unocal is “not for sale,” and analysts speculated that Hartley would vigorously fight any takeover attempt.

‘Tough Fight’

“It’s going to be a tough fight,” said M. Craig Schwerdt, an oil industry analyst with Los Angeles-based Morgan, Olmstead, Kennedy & Gardner. “We have to see exactly what Mesa is going to do.”

“Obviously, Boone Pickens is making his move,” said Herbert Hart, an analyst with San Francisco-based S. G. Warburg, Rowe & Pitman, Akroyd Inc. “Unless he has changed his strategy entirely, which I doubt, I don’t think he’s interested in acquiring Unocal, running it or even liquidating it.”

Instead, Hart said, Pickens probably is following the same course he did in four previous takeover attempts: buy a large block of stock, threaten a takeover and later sell the stock back to the threatened company at a higher price or drive the firm into the arms of a rescuing “white knight” corporation interested in a friendly takeover.

Pickens, in the past, has denied that he is a “corporate raider” or “greenmailer.” Pickens has said he wanted to acquire each of the four companies--Phillips Petroleum, Gulf Oil, Cities Service Co. and Great American Oil Co.--and ended up increasing shareholder value in each company.

Before Thursday’s announcement, Mesa Partners had repeatedly said it bought its Unocal stock “solely for the purpose of investment.” But Unocal had characterized the purchases as a hostile takeover, and Hartley had criticized Mesa and Pickens in speeches.

Now, Mesa Partners said, it is “reconsidering its purpose.”

Mesa said it requested a stockholder list and other information from Unocal on Wednesday that will allow the group to solicit proxies in favor of its proposals to postpone the annual meeting and the election of directors, and to request that directors fix a new record date for determining which shareholders can vote at the meeting.

Currently, shareholders are allowed to vote at the April meeting only those Unocal shares that they owned on March 14.

Mesa said it submitted its shareholder proposals to Unocal on Thursday. Under Unocal’s newly revised corporate bylaws, Monday is the last day that new business or nominees for director can be proposed for the April meeting.

Anti-Takeover Defenses

Mesa said it has hired the New York-based Carter Organization to solicit proxies. Mesa said it may use the proxies to prevent the presence of a quorum at the meeting.

Analysts said Unocal will be a difficult quarry to capture because of several anti-takeover defenses that it has adopted.

In addition to the recent amendments that eliminated the ability of shareholders to bring up unannounced business at an annual meeting or nominate directors on short notice, Unocal doesn’t allow cumulative voting for directors and requires 75% shareholder approval of any takeover proposal not favored by three-quarters of the board of directors. Unocal’s directors also have staggered terms.

If Mesa were able to get three directors elected, even though it would be less than one-third of the board, “it would be a sort of no-confidence vote in management” because Hartley is one of the directors up for reelection, Schwerdt said. Mesa would then be able to pressure the other directors into restructuring the company, he said.

A takeover “is going to be kind of a tall order” for Pickens because of the expense involved, Hart said, adding that the Pickens group would need to spend about $5 billion to buy only half of the company’s stock.

Hart said he thinks Unocal’s most probable defense, if pushed hard enough, would be to seek a “white knight” for a friendly takeover.

“Let’s face it, Fred Hartley (who is 67) . . . is aware that he’s not going to be around forever,” Hart said. “I think it would kill him to see his fine company taken over by a raider, and he considers Pickens some kind of pirate.”

Hart said the most obvious white knight candidates are international oil giant Royal Dutch Shell and Cleveland-based Standard Oil Co. (Ohio), which is 55% owned by British Petroleum.

“I don’t think Hartley would go along with the kind of poison-pill (defense) approach that others have done,” Hart said. “I don’t think he would do anything that would make his company less competitive.”