Texas oilman T. Boone Pickens Jr. acknowledged Monday that his investor group probably has lost a key vote to block the election of Unocal’s directors and to delay the company’s annual meeting, but he vowed not to abandon his bid to take over the Los Angeles-based oil company.
“We probably do not have the vote” of enough shareholders to pass the proposals, Pickens told a press conference.
During a colorful, two-hour annual meeting at Unocal’s downtown headquarters that was punctuated by several lively exchanges between Pickens and Unocal Chairman Fred L. Hartley, Pickens told about 1,700 shareholders that “our message is simple--we have asked that you preserve your rights as shareholders” by voting for the Pickens group’s proposals to adjourn the annual meeting until June 28 and rescind any action taken at the meeting.
Pickens told shareholders that the adjournment is necessary to evaluate offers by Unocal and the Pickens group to buy Unocal stock, and to assess the reaction of Unocal’s management to the Pickens group’s offer. Unocal, which has rejected the Pickens group’s $54-per-share offer for 50.1% of the company as “grossly inadequate,” had nominated three directors for reelection, including Hartley.
The results of the shareholder voting were not announced Monday, and Unocal’s annual meeting was adjourned until May 20, at which time the formal tally is expected.
Meanwhile, the Pickens investor group won a major round in Delaware Chancery Court when a judge ruled that Unocal must include the group in its offer to buy 50 million Unocal shares for $72 each.
Pickens’ Mesa Partners II investor group also amended its suit in U.S. District Court in Los Angeles, claiming that Unocal improperly solicited shareholder votes for management’s slate of directors and against Mesa’s proposals.
David Batchelder, financial vice president of Mesa Petroleum, which owns 90% of the Mesa Partners investor group, said the tally will be extremely close and that the vote of Security Pacific National Bank, trustee for about 12 million shares from Unocal’s employee stock ownership and profit-sharing plans, is the “swing vote” that could mean defeat or victory for either side.
Batchelder said in an interview that he doesn’t know which way Security Pacific voted, but “I think it’s wishful thinking on our part to think that Security Pacific would vote against (Unocal) management.”
Security Pacific declined to disclose how it voted Monday.
Unocal’s annual meeting, which was held in four locations at the company’s downtown headquarters that were linked by closed-circuit television, started on a theatrical note. The small auditorium from which Hartley led the meeting was darkened and a voice boomed over stirring music and pictures of Unocal employees at work: “Live from Los Angeles, California, welcome to the 1985 annual meeting of Unocal shareholders.”
Pickens was allowed to make a brief statement, which was received with polite applause. But the liveliest part of the meeting came during the question-and-answer session during which shareholders quizzed Pickens and Hartley on their offers for Unocal shares and on their future plans.
At one point, Pickens remarked that the meeting was becoming “lengthy.”
Retorted Hartley: “This meeting may be dragging, but we’re the shareholders’ company, too (a reference to Mesa Petroleum’s corporate slogan) and if shareholders have questions, we’ll take them.”
Replied Pickens: “It isn’t a question of the shareholders’ questions, it’s that your answers are so lengthy.”
Hartley’s response was lost in audience laughter, but had something to do with “educating” Pickens.
The exchange that drew the biggest laugh of the day came when an elderly woman shareholder asked Hartley when Unocal was going to appoint a woman to its board.
Hartley, at first, punted, saying: “Mr. Pickens, do you want to answer that question?” But he went on to explain “how hard it is to select women who have honest-to-goodness business experience.” He added, “I had one lady in mind and she died.”
Pickens sought to minimize the importance of the vote to adjourn the annual meeting.
“Our offer is not conditioned on adjournment,” he said in an interview following the annual meeting. “I want to win every time we have a contest, but you don’t win all the battles.
“We’re not dead in the proxy fight,” Pickens said, indicating that there is still some uncertainty over the outcome.
Pickens said he believes that fewer than 50% of all Unocal shares were voted on election of directors, meaning that there was a high number of abstentions. “They obviously don’t have a mandate to do as they please. I think the stockholders put them on notice that they ought to be doing something.
“We’re not going to go away,” Pickens said, adding that “we can hang in there for a year” until the next annual shareholders meeting.
Unocal’s bylaws prevent shareholders from calling special shareholder meetings, and shareholder proposals can only be brought up at annual or special shareholder meetings. But Mesa sources said the Pickens group nonetheless would be able to put its own directors on the Unocal board if it gains control, since it expects some existing directors to resign.
“I’m not uncomfortable with it (the situation),” Pickens said. “Our financing is in place.” Mesa’s costs in the takeover battle, including fees and interest, are about $60 million and will be increased by $7.5 million every 45 days beginning at the end of July.
But Pickens admitted, “I don’t know what our next ploy is here.”
At a separate press conference after the annual meeting, Hartley said the takeover attempt by the Pickens group “is strictly a game on their part for the purpose of making some fast money.” Hartley said he might be willing to buy back Mesa’s 23.7 million shares at the current market price, but Pickens said he would reject such an offer. (On the New York Stock Exchange Monday, Unocal shares closed at $45.75, off 25 cents from Friday.)
In the Delaware court ruling, Vice Chancellor Carolyn Berger granted the Pickens group’s request for a preliminary injunction barring Unocal from excluding Pickens from its lucrative stock buy back offer. She temporarily restrained Unocal two weeks ago from completing the offer until she could study the matter further.
Unocal made its stock buy back offer as a defense against Pickens’ takeover bid. It has argued that discriminating against a single shareholder is appropriate under the circumstances, a view Pickens is challenging in Delaware court because Unocal is incorporated in that state.
Berger decided that “the exchange offer’s exclusion of Mesa cannot be justified as a defensive maneuver without departing from the established principles of fiduciary duty governing directors’ treatment of their shareholders.”
Although the decision was a setback for Unocal, some believe that Unocal will find a more sympathetic ear in the Delaware Supreme Court, which will hear the case Thursday. The higher court last week ordered Berger to consider such issues as whether Pickens’ motive in pursuing Unocal is to get selective treatment for himself.
“Obviously we’re not happy with the decision,” said Andrew Bogen, a partner at the Los Angeles law firm of Gibson, Dunn & Crutcher, which is representing Unocal. “But we think we’ve got a good shot on appeal.”
Hartley, questioned repeatedly both at the annual meeting and at the press conference, would not say whether Unocal will proceed with its tender offer for 50 million shares if it is forced by the Delaware Supreme Court to include Pickens. He would say only that the company reserves the right to withdraw its offer.
‘Start All Over’
In amending its suit before U.S. District Court Judge A. Wallace Tashima in Los Angeles, the Mesa group alleged that Unocal improperly solicited proxies to elect its slate of directors by promising some big shareholders that the exchange offer will be completed even if Unocal is forced to include Mesa. Batchelder said the Mesa group will seek to have the proxy vote thrown out “and we’ll start all over again.”
A Unocal spokesman had no comment on the amended suit.