Pickens Opens Fight to Gain Control of Unocal : Group Offers $54 Each for 64 Million Shares of Stock; Hartley Vows to Keep Firm Independent
After weeks of verbal sparring, the opening round of what is expected to be a bruising corporate fight finally began Monday, with Texas oilman T. Boone Pickens delivering the first blow: an offer to buy control of the parent of Union Oil Co. of California.
Pickens and his investment group are offering $54 a share in cash for 64 million shares of Los Angeles-based Unocal Corp., whose iron-willed Chairman and Chief Executive Fred L. Hartley has vowed to keep the company independent. If Pickens is successful, his group would own just over half of Unocal’s stock and thus be able to exert control over the nation’s 12th-largest oil company. Pickens’ tender offer is scheduled to last until May 3.
The Pickens group, which includes Mesa Petroleum Co., based in Amarillo, Tex., that Pickens founded in 1964, already owns 23.7 million shares of Unocal, a 13.6% interest. The additional shares needed to take control will cost about $3.46 billion, an amount the New York investment banking firm of Drexel Burnham Lambert Inc. is now trying to raise on Pickens’ behalf. Mesa Petroleum is much smaller than Unocal, with revenues of $413.5 million last year compared to Unocal’s $11.5 billion.
His next step, Pickens said in an interview at The Times, would be to acquire the remainder of Unocal by offering securities, not cash.
“Our single purpose is to gain control of the company,” he said. “Then we’ll decide what we’re going to do” about the company. He said he has no immediate plans to trim employees or assets but acknowledged that he has not thoroughly investigated Union’s operations.
Unocal issued a statement in which it cautioned stockholders “not to act hastily with respect to their investment in Unocal” and promised to review the offer and respond within 10 business days. Unocal spokesman Barry Lane said he had “no information” on whether a meeting of Unocal directors has been scheduled.
Wall Street greeted the announcement by bidding up the stock of Unocal $1 a share to $49.75. The stock was the most active issue on the New York Stock Exchange, as almost 2.7 million shares changed hands.
Industry analysts generally characterized the proposed price, $54 a share, as fair or only slightly low.
Pickens’ forum for his long-awaited move was a full-page newspaper advertisement in the New York Times. Even Hartley heard about it secondhand. He told company employees that he heard it on the radio on his way to work.
Pickens contended in the interview that he originally did not plan to make a bid to take control of Unocal. He said he would have settled for a partial corporate restructuring but has not been able to reach Hartley to discuss the plan. Hartley was unavailable for comment.
Although the oil industry has been abuzz for months about a possible Pickens bid for Unocal, the offer actually was hastily put together. Pickens did not make up his mind until the long Easter weekend, sources close to the deal said, so that Mesa’s investment bankers were working around the clock during the holiday.
Reaction Awaited
What Hartley’s counterpunch will be was the subject of discussion on Wall Street and in business circles Monday. He has been one of the most outspoken industry critics of corporate payments to hostile bidders--so-called “greenmail”--and any kind of restructuring that would leave Unocal heavily in debt. He also has consistently ruled out any plan to buy out Unocal’s public shareholders or to bring in a “white knight,” a bidder more palatable to management.
That leaves an acquisition, the option securities analysts and investment banking sources consider most likely.
Unocal was not talking about that prospect Monday. But industry sources who have been Hartley watchers for years said the acquisition of an oil industry company smaller than Unocal would be consistent with Hartley’s growth posture.
However, one prospect that had been frequently mentioned, the Union Texas subsidiary of Allied Corp., was partly sold to someone else Monday.
The only thing that industry watchers were willing to predict with any degree of certainty Monday was that this promises to be an unpredictable fight.
Known as Mavericks
Both corporate chieftains are known as scrappy mavericks, each as well known as the company he heads. Moreover, even Union employees characterize their organization as a “street-fighting” outfit. And Pickens, in his fifth assault on a U.S. oil company in as many years, is by now a sophisticated player of the takeover game, even though he has never walked away with his victim. He has either been bought off or has frightened his targets into the arms of a third company.
His justification for seeking to take over oil companies has been that their managements have done nothing to improve the value of their stock. Even though he has not been successful, his efforts since 1982 have netted his investor group pretax profits of about $600 million.
For his part, Hartley has taken several public steps so far to ward off Pickens. Last week, Unocal hiked its dividend on common shares. Previously, it approved a change in its bylaws to make it more difficult to nominate directors who are not approved by management. The company last month sued Security Pacific National Bank, claiming that its participation in a banking syndicate making loans to the Pickens group violated the bank’s longtime business association with Unocal. The bank has since dropped out of the syndicate.
Handling Own Fight
One factor that is throwing off the pundits trying to predict the outcome is that Unocal apparently is handling its own fight rather than relying on the usual bevy of outside advisers, normal procedure for most takeover targets. Reports that Unocal has retained the investment banking firms of Goldman Sachs & Co. and Dillon Read & Co. were flatly denied by Unocal spokesman Lane. Those firms have been used by Unocal as financial advisers off and on over the years, he said, but have not been enlisted for this battle.
Nor, he said, has Unocal retained a law firm specializing in takeovers or appointed a team of management officials and advisers to handle the takeover battle while others run the company. All of those moves have become standard procedure among corporations attempting to fend off unwanted takeovers.
But one investment banker who had tried to sell his service to Union for this fight said he was not a bit surprised at Hartley’s decision. “He turned us down,” the banker recalled, “because he said hiring an outside adviser would be a sign of weakness.”
