Pickens Wins Court Round With Unocal : Judge Orders 2-Week Delay in Oil Firm’s Annual Meeting

Unocal’s annual shareholders meeting will be delayed until May 13 because of a federal court ruling in Los Angeles on Friday that both Unocal and its suitor, a group headed by Texas oilman T. Boone Pickens Jr., misled shareholders in statements made earlier in their bitter takeover fight.

U.S. District Judge Wallace Tashima ordered Unocal to “correct misleading” information in the proxy materials that it had sent shareholders for its annual meeting, which had been set for Monday.

He also instructed the Pickens group to disclose that it intended as early as February to seek control of Unocal and to disclose how it plans to repay the debt that it will incur in its takeover attempt.

Unocal shareholders deserve at least two weeks to review corrected materials, the judge said in ordering that the annual meeting be held no earlier than two weeks after the dissemination of the corrections.

‘Any Delay Favors Boone’

The ruling is a legal victory for the Pickens group, which officially launched its takeover bid April 8. It had challenged certain statements in Unocal’s proxy materials and sought a meeting delay of at least 20 days.

Separately, it has said it will ask shareholders at the meeting to approve a 60-day adjournment so that it can assemble its own slate of directors and gather support for its takeover bid.

“Any delay favors Boone,” said M. Craig Schwerdt, an energy analyst with Morgan, Olmstead, Kennedy & Gardner.

Mesa Chief Financial Officer David Batchelder, noting that “we are happy with the ruling,” called the decision a victory for Unocal shareholders. “It gives them at least two more weeks to see where everybody stands.”

Tashima’s ruling permits both sides to continue soliciting proxies for the proxy fight at the annual meeting.

Unocal said it will comply with the ruling and already has started preparing new proxy materials, which it will begin distributing no later than Tuesday. The company said it will convene the meeting Monday just long enough to adjourn it and will reconvene the session at 10 a.m. May 13.

Unocal would not characterize the ruling as a setback. But after the court hearing Friday morning, Unocal attorney James Robertson told the court, “You’ve given Mesa what they’ve been asking for all along. I don’t know if we can correctly weigh the damages that may have been inflicted.”

Delaware Court Ruling

Central to the ruling is a recent change in Unocal’s bylaws. The amendment requires shareholders to give at least 30 days’ notice to nominate directors or bring other business before the annual meeting. Unocal mailed proxy material to its shareholders April 7. That material stated the company’s position that the clock started ticking 30 days before April 29, even if the meeting is delayed.

On April 22, a Delaware court ruled that Unocal cannot block the Pickens group from making proposals at the annual meeting if it is postponed.

Tashima agreed with that interpretation and ordered Unocal to remove that statement from its proxy materials.

Neither ruling considered the broader issue of whether the bylaw amendment is legal.

Tashima also decided that Mesa did violate federal securities law when it described its purchase of Unocal stock as purely an investment. But he denied a request by Unocal to punish those misstatements by prohibiting the Pickens group from voting part of its Unocal stock or proxies at the annual meeting, calling such a prohibition “extreme.”