Takeover War : Unocal Saw Pickens Bid, Trumped It

Long before the war began, the counterattack was being plotted.

In early 1983, Sam Snyder, assistant general counsel of Union Oil, sat in his 11th-floor office at the oil company’s Los Angeles headquarters and wrote a memo outlining potential defenses against corporate raiders.

Union Oil’s best defense in a takeover war, he wrote, is its own executives. Turn the responsibility over to so-called defense experts, and defeat is imminent. “Nobody calls the shots at Union Oil Co. except the Union Oil Co.,” Snyder’s memo said.

It was a strategy from which the company, now called Unocal, never strayed during the landmark fracas that matched Fred L. Hartley, 68, Unocal’s crusty chairman, against T. Boone Pickens Jr., 56, a resourceful Texan whose efforts to take over big oil companies have earned him millions.

Scarred but Independent

Using a defense designed by its own executives and outside advisers not considered part of the Wall Street merger fraternity’s first string, Unocal emerged from the war last month scarred but still independent.

Based on interviews with most of the participants, this is the story of the battle for Unocal:

Since Conoco’s 1981 fight to escape a takeover by Seagram Co., Snyder had been keeping files on oil-industry merger wars. He concluded that suitors and defenders often used the same strategies but that the raiders--usually craftier at waging corporate combat--had the advantage over untested company generals. As a result, the defenders had a tendency to surrender prematurely, Snyder observed.

Unocal, under the fiercely independent Hartley, vowed not to. Spurning the advice of high-priced legal experts, it set a trap for sharks.

Andrew Bogen, who had done much work for Unocal as a partner in Gibson, Dunn & Crutcher, a Los Angeles law firm, believed that it was a decision Hartley would regret.

‘Shark Repellents’

After outfitting dozens of companies with anti-takeover “shark repellents,” Bogen sensed that shareholders were becoming outraged over managements that used the specter of hostile takeovers to entrench themselves in high-paying jobs. Unocal shareholders won’t go for it, he warned.

But Bogen was wrong: At Unocal’s 1983 annual meeting, a whopping two-thirds of Unocal’s shareholders approved corporate bylaw changes making takeovers much more difficult and, in effect, further entrenching the Hartley management.

T. (for Thomas) Boone Pickens Jr. went back on the prowl for cheap oil stocks in 1984.

At a Geneva meeting in October, the Organization of Petroleum Exporting Countries had agreed to cut oil production to prop up the cartel’s crumbling price system. The price of oil company stocks took a dive as investors worried about the industry’s profits, and trading volume was high. It was a good time to amass a significant stake in a company cheaply without being detected.

On Oct. 20, Mesa Petroleum, the Amarillo, Tex., company headed by Pickens, formed a partnership to buy oil stocks with two Texas oilmen who were friends of Pickens, Cyril Wagner and Jack Brown. The next day, the partnership started buying shares of Phillips Petroleum and Unocal.

Before long, both companies detected unusually heavy buying of their stock. Both suspected it was Pickens, but they were puzzled. Was he trying to take over two companies at once? Before long they had an answer. By December, Pickens narrowed his target to Phillips and stopped buying Unocal stock, to the company’s relief.

Two days before Christmas, Phillips, awkwardly struggling to escape a takeover, agreed to an expensive recapitalization and stock repurchase plan that gave Pickens an $89-million profit on his Phillips shares. Phillips emerged independent but deeply in debt and still vulnerable to other corporate raiders.

A Volley Is Fired

In the first week of February, Pickens’ team began buying more Unocal stock. Their 4% stake crept over the 5% mark by Feb. 4, and then to 7.9% by Feb. 14, the day Mesa Partners notified the U.S. Securities and Exchange Commission of its holdings.

“Some valentine,” a Unocal executive groused. But it still wasn’t clear whether war had been declared, and even the Pickens group was not sure of its intentions. Unocal, however, had no doubt. “We didn’t need a road map,” Hartley said, “because he was obviously preparing to do . . . what he had done to four or five other companies.” But Pickens’ very profitable effort to acquire Phillips had left him branded as a hated robber baron. Phillips’ hometown of Bartlesville, Okla.--the state where Pickens, his wife, Bea, and many of Mesa’s executives were reared and educated--had mounted a well-publicized campaign to “bust Boone.”

Pickens was uncharacteristically disturbed. “Don’t they know I don’t want to tank the town?” he asked his key strategists, David Batchelder and Sidney Tassin.

It wasn’t altogether surprising to them, then, when Pickens agreed to Phillips’ restructuring plan even though he was not entirely comfortable with it.

Pickens was also unhappy that his critics now called him a “greenmailer.” He had often blasted the corporate practice of buying out unwelcomed suitors at a premium. His crusade was meant to boost the value for all oil company shareholders, he insisted. Nonetheless, the greenmail charge stuck.

After five unsuccessful takeover efforts, Pickens wasn’t in the mood to pick another fight. Mainly, his team wanted to spur Unocal into making enough changes to boost the stock price to about $50 a share, make a quarter of a billion dollars on its investment and be on its way.

Unocal Marshals Its Forces

Publicly, Hartley greeted the news of Pickens’ investment with grudging praise for his taste in stock. In private, he issued a battle call.

Unocal’s internal fight squad was ready: Snyder, Unocal Senior Vice President Claude S. Brinegar, Chief Financial Officer Philip Blamey and representatives from Unocal’s outside investment banking and law firms.

After a board meeting Feb. 28, several boarded a plane for New York. There, they met with the investment banking firms of Goldman, Sachs and Dillon Read as financial advisers and the Hill & Knowlton public relations firm, which was to deal with the press. D. F. King, a proxy-soliciting firm already on retainer, was put on alert.

Three weeks went by. The defense team pored over every Mesa record it could find. Special attention was paid to a loan to Mesa from Security Pacific National Bank, Unocal’s chief bank for 40 years and the trustee of Unocal’s employee pension funds.

(Los Angeles-based Security Pacific had been lending money on the strength of Mesa’s oil and gas properties for a decade. But then Security Pacific Chairman Richard J. Flamson learned that Mesa had started using part of the loans to buy Unocal stock.

(Flamson was horrified. Nobody had broken any bank rules, but the appearances were troublesome and Flamson knew it. He ordered his people to get out of the loan agreement and told Unocal about it.)

At the Feb. 28 meeting, Unocal’s board adopted another shark repellent, requiring anyone who wants to nominate a director or bring up business at Unocal’s annual meeting give at least 30 days notice. The meeting was scheduled for April 29. Hartley went on the lecture circuit, giving what Mesa’s executives called “sassy speeches” about corporate raiders destroying the American Way.

And Unocal sued Security Pacific, claiming that the bank’s loans to Mesa were a breach of contract and its fiduciary duty to Unocal. Copies of the suit were bundled with a letter Hartley had dashed off to Federal Reserve Chairman Paul A. Volcker, wrapped in plain brown paper and dispatched to the homes of directors and officers of Mesa’s other lenders.

Outraged Mesa officials then sued Unocal, contending that it was trying to intimidate Mesa’s lenders.

Skirmishing Escalates

It had become abundantly clear that Unocal would not voluntarily restructure itself, as Pickens had hoped. Unocal was one of the few big oil companies that had not taken steps to prop up its sagging stock price, a stance that had been worrying Snyder and other Unocal executives for months.

“It was obvious to a lot of us we had to get our stock price up or we were vulnerable,” Snyder said.

Pickens picked up those signals. At first, he figured that Hartley might agree to a Phillips-style restructuring. But Hartley’s increasingly bitter attacks on Pickens and corporate raiders in speeches and congressional testimony dashed that hope.

“It’s gonna take a little push,” Pickens told his strategists.

Batchelder and Tassin instructed their brokers to start buying more Unocal stock, even though it was becoming relatively expensive. But they correctly perceived that the battle was more difficult than anticipated. There were no “white knights” on the horizon to take over Unocal at a higher price. Pickens was adamant that he would not accept greenmail to give up the fight. And even if Hartley agreed to a settlement, the likelihood that the Pickens group would make a profit was slight.

Mesa, complaining about Hartley’s public statements, said it was “reconsidering the purpose” of its Unocal investment, adding that it might seek control or try to force a restructuring.

Unocal also was plotting strategy. A week before Easter, its strategists gathered in Los Angeles. True to Snyder’s 1983 memo, Unocal executives made it clear from the start that they would run the show.

The options game began. With Mesa’s alternatives listed on one side of a blackboard and Unocal’s on the other, the investment bankers ran through dozens of scenarios.

“The most dangerous step (Mesa) can take,” Goldman, Sachs partner Peter Sachs told the group, “is a two-pronged attack: commence a proxy fight and tender offer for at least half the stock, with financing from Drexel.”

The investment banking firm of Drexel Burnham Lambert had astonished its rivals a few months earlier by floating more than $1 billion worth of “junk bonds” to finance a hostile takeover bid in just 48 hours. Such high-yield, low-grade bonds are frequently used by corporate raiders to finance their takeovers, and Drexel has been the biggest underwriter of such financing.

“If you do nothing,” Sachs told the Unocal defense team, “on May 3, Pickens will have maybe 80% to 90% of the stock because you can expect that many shares to be tendered.” Sachs correctly guessed that Pickens would make a tender offer to buy half of Unocal’s stock for cash, then seek to purchase the rest with some kind of subordinated junk financing.

“By June 15,” Sachs continued, “he owns the company and you guys are in Paducah.”

War Is Officially Declared

Good Friday, April 5, was just another work day for Sidney Tassin, who at 28 is one of Mesa’s two whiz-kid strategists, the other being his boss, 35-year-old David Batchelder.

While Tassin’s family was enjoying the first day of the long Easter weekend, Tassin was in Houston giving a deposition in one of Unocal’s lawsuits. He was displeased because the action was in New York, where Batchelder was meeting with Drexel executives to discuss raising money for a Unocal bid.

At a morning break, Tassin checked in with Batchelder. The Mesa team was mulling over the possibility of making an offer to exchange Unocal shares for other securities, rather than cash. They agreed to talk later.

At noon, Tassin was told that the exchange idea had fizzled. By the time they got SEC approval (as is required for an exchange offer), Unocal would have escaped, Batchelder said.

When he called at 2 p.m., Tassin learned that a tender offer for Unocal stock was heading the list of options and that Drexel was talking money.

“Sounds good,” Tassin said. “When do we go?”

“Monday,” Batchelder replied.

Mesa would offer $54 each for 64 million Unocal shares--about half the stock, when added to what Mesa already owned. Drexel believed that it could raise about $3 billion in junk bonds, and Batchelder figured the group could borrow another $1 billion from banks.

All day Friday, they had assumed that they would announce the offer Monday, with financing details to follow a week later. That’s the way it was done with the Phillips bid.

But late that evening, a lawyer reminded them that the week’s delay had given Phillips five working days to map counter-strategy. “Why not go now?”

Line up a lead bank, hammer out an agreement with Drexel, draft and print a formal tender offer, and buy ad space in a newspaper all in one weekend? It had never been done so fast.

Calls went out. Bankers and lawyers dropped everything and flew to New York. Among them was a lawyer for the bank Batchelder wanted as the lead lender.

“I can’t get there until tomorrow,” the lawyer said. “There aren’t any more flights.”

“Get here,” Batchelder demanded.

The lawyer chartered a plane.

Nearly 50 people worked around the clock and then around the clock again. When somebody needed a few winks, he slept on the floor at Mesa’s New York law firm or in the print shop, and someone else would take his place.

Drexel had a week to raise its $3 billion, more money than most companies take in from sales during an entire year. Not even the Drexel wizards had raised that much money that fast before.

On Easter morning, Arthur Long, a veteran proxy solicitor for D. F. King, heard from one of his informants that Monday editions of the New York Times would carry a full-page ad announcing Pickens’ offer for Unocal.

Long called Bogen, Unocal’s lawyer in Los Angeles, who spread the word. But at 9 p.m. California time, Long called back. The first edition was out; there was no ad. Everyone breathed a little easier and went to bed.

Sam Snyder was just about to leave the house the next morning at 6 a.m. when the phone rang. The ad had run in the second edition.

Unocal Counterattacks

Hartley heard the news on the car radio driving to work. “I was prepared for a battle,” he said. “A very barbaric-type situation.”

By midday, Unocal’s defensive team had gathered in Unocal Conference Room 437. By the end of the week, they were calling it the dungeon.

For hours, options were scrawled on a blackboard, crossed out and scrawled again. The one that appeared most often was an offer by Unocal to buy back some of its stock at a price high enough to keep shareholders from selling to Pickens. Eventually, the company offered to swap senior notes worth $72 each for 87.2 million of its shares. But that offer would not be made unless Pickens was successful in buying the 64 million shares he was seeking.

They discussed white knights, but quickly discarded that option because they were determined not to be forced to sell the company. They discussed loading up the company with debt by making acquisitions, or selling “crown jewels” (unloading a company’s best assets to make it a less attractive target), but not seriously.

They even discussed “crazy” defense strategies they dubbed “Onion” and “Red Sox.”

“Onion” was their favorite. Brainchild of Ricardo Mestres of the New York law firm Sullivan & Cromwell, “Onion” would have created an intermediate holding company between Union Oil and Unocal. Under the plan, Pickens might succeed in acquiring Unocal but it would be an empty shell. The new holding company would be loaded with “every shark repellent known to man.”

And if Pickens managed to penetrate its defenses, they would repeat the process, peeling away holding companies like layers of an onion.

“Red Sox” would have put the stock of Union Oil into a voting trust, and a trustee would be selected who could be counted on never to vote with Pickens. Who would be the trustee? Snyder suggested the entire Unocal work force. Others began pitching in ideas. “Hell, why not call in the Boston Red Sox?” someone offered.

By a quirk in the laws governing tender offers, the Unocal team knew that Mesa couldn’t begin to buy stock under its offer for 20 days. But Unocal had to wait only 10 days before it could buy back its own stock under a so-called “self-tender.” If they moved quickly, their offer could be successful before the Pickens group could even start buying.

Unocal’s offer had to be attractive enough so shareholders would sell to it instead of to Pickens. But if it was too attractive and they didn’t watch the dates, Pickens would be able to buy 64 million shares at $54 apiece, then immediately sell them back to Unocal for $72.

If they could prevent Pickens from buying more stock and then selling it back to Unocal, they could limit the damage. But was there any chance they could exclude him from Unocal’s offer?

It was an intriguing and untested idea. The SEC had always ruled that company must treat all shareholders alike, which seemed to rule it out.

But this was war. If a government can make special rules in wartime, they reasoned, why not a company? All agreed that it was worth a shot.

Then they considered what to do if they lost the bid to exclude Pickens. They set another trap: Units of a limited partnership composed of key Union Oil assets would be distributed all at once to Unocal shareholders in the event of a change in corporate ownership. That would saddle the Pickens group with an immediate $1-billion tax bill on top of $11 billion worth of new debt taken on as a result of the two competing stock purchase offers.

Finally, they discussed an even more potent shark repellent that even now they won’t discuss. It’s been put away for a rainy day.

The Unocal team also decided to take the attack directly to the Pickens group. The weakest part of the Pickens offer was its junk-bond financing, they figured. The company would try hard to plant doubts about such bonds in the minds of investors, Wall Street analysts and reporters, and design its own offer so that the notes it planned to swap for stock would have preference over Pickens’ junk bonds.

“If he did get us,” one investment banker said, “we were going to make sure we fed his cash flow through an eyedropper.”

But their cocksure attitude didn’t last. They soon learned that Drexel had raised $3 billion in less than a week; in fact, it stopped soliciting investors early--at 1 p.m. Friday. By then, the Pickens junk bond offer was $400 million oversubscribed.

A Showdown Approaches

The next day, Unocal’s board met to discuss the situation. Sam Snyder reviewed Mesa’s offer. The directors talked all day Saturday and again Monday. Their decision was announced Tuesday morning.

Calling the Pickens offer “grossly inadequate,” the board countered with an offer to buy back 87.2 million company shares. The Pickens group was excluded from participating.

The Pickens team had guessed that an offer for its own stock would be Unocal’s best defense. But it believed that Unocal would live to regret it. The giant new debt created by Unocal’s buy-back offer and its uncertainty would anger the big financial institutions such as pension funds that held large chunks of its stock, Batchelder figured.

As for the exclusion of Mesa from the offer, Batchelder told Tassin, “Now that’s interesting.”

Batchelder was right about the big institutions. Before long, Unocal caved in and agreed to buy back 50 million shares at $72 even if Pickens’ offer was not successful. But Unocal also reserved the right to withdraw the offer, which Pickens said signaled that the company wasn’t really committed to it. For the first time, the company also disclosed publicly that it would study the formation of a limited partnership to own some Union Oil assets--something shareholders love because it gives them two securities instead of one and usually boosts the price of the original stock.

The Pickens group challenged the legality of its exclusion from Unocal’s offer in a Delaware court, the state in which Unocal had incorporated under its 1983 bylaw changes. Pressure mounted on Unocal to let Pickens participate in the buy-back offer.

U.S. District Judge A. Wallace Tashima in Los Angeles ordered Unocal to delay its annual shareholders’ meeting, scheduled for April 29, for two weeks while both sides corrected misstatements in materials they had sent shareholders.

As the new meeting date of May 13 approached, Unocal’s team was worried. It was losing the support of institutional investors. Pickens seemed to be gaining momentum and could win a shareholder vote to block the election of three directors and postpone the meeting further, in effect to give his team more time to win support for its takeover attempt.

The delay “put us through two weeks of hell,” Snyder said.

But in hindsight, Hartley believes that the delay was beneficial. It gave the company more time to gather shareholder support to defeat Pickens’ proposals.

A huge proxy-gathering campaign during those two weeks by Hartley and nearly 700 Unocal employees made a difference. Hartley bragged the morning of the annual meeting that he had just won over an owner of 600,000 shares.

When Bogen met Long, the proxy solicitor, for dinner a few days before the meeting, he was startled when Long leaned over and whispered: “Don’t tell anybody, but I think we can win.”

Sunday before the meeting, Mesa was telling people the same thing.

At last, it was Monday. Time for the big showdown.

But to the disappointment of the crowd of 1,700, both Pickens and Hartley were on their best behavior. Neither could resist a couple of pokes at the other, but by and large each was cordial.

Even the Unocal executives noticed. “You could have knocked us all over with a feather,” Snyder said. “We had no idea what was going on.”

There was a motive behind the cordiality at the meeting: Hartley and Pickens were about to sit down and talk.

The first approach had come early in the fight. A third party whom neither side will identify approached Unocal to suggest a meeting. Neither side was interested.

But on Friday before the annual meeting when he broached the matter again, the middleman struck a chord.

Truce Talks Collapse

Drexel’s Mike Brown knew something was brewing Monday morning when he joined about 18 other Pickens strategists for breakfast in a suite on the second floor of the Sheraton Grande in downtown Los Angeles. Nobody said anything in the works. He just sensed it.

About 45 minutes before the 10 a.m. shareholders’ meeting, Pickens took a call. Hartley was on the other end, as was the middleman. It was a conference call with a bad connection. They hung up.

Pickens called back from a pay phone at the hotel. He agreed to stay in Los Angeles after the meeting and wait to hear from Hartley.

Shortly before the annual meeting ended, the trial court in Delaware reiterated an earlier ruling that Pickens could not be excluded from Unocal’s offer. But while the judge ruled for Pickens, she sided with Unocal on several key points. Both sides found cause for hope.

That night, the Pickens team talked strategy briefly and went to bed. Hartley spent the better part of the evening reviewing a videotape of his performance at the annual meeting.

Tuesday morning, the Pickens group checked out of the Sheraton Grande to foil enterprising reporters and drove to the nearby New Otani, where Hartley had suggested they meet. The talks got off to a bad start when Hartley ribbed Pickens about “showing up here in your goddamned stretch limo.”

But otherwise, the talks were cordial and some progress seemed to be made.

Pickens wanted guarantees that there would be a limited partnership distribution to shareholders, that the cash dividend would be retained, that Unocal shareholders would approve any settlement, and that Unocal would increase the minimum number of shares it would buy back to 75 million from 50 million.

After some indignation, Unocal executives offered to draft a settlement and present it the next morning.

As they left, Pickens remarked that they had gotten through the entire meeting without him calling Hartley “arrogant” and without Hartley calling Pickens “an idiot.”

Wednesday morning, the Pickens group arrived at 9 a.m., as scheduled. Actually, even the time of the meeting required negotiation: the Mesa strategists had asked for an 8 a.m. meeting. Hartley suggested 9:30. They agreed on 9.

Hartley arrived at 9:30.

It was immediately clear to the Mesa group that things had deteriorated overnight.

“It was as if Tuesday never happened,” Batchelder said.

Everyone in the room received a pair of two-page handouts, which Hartley proceeded to read slowly. The terms departed sharply from the previous day’s talks.

The Pickens group left the room to talk. They walked down to a bank of elevators, fearing that an adjacent room might be bugged.

It took them two minutes to decide they were going home. Pickens, obviously incensed, looked at his watch. “I’ve decided to set my watch back to Central time,” he told Hartley. And he and his group flew home to Amarillo.

Unocal Wins in Delaware

Within three hours of the trial judge’s decision in Pickens’ favor on May 13, A. Gilchrist Sparks III, Unocal’s Delaware lawyer, was making his case for an appeal before Supreme Court Judge Andrew G. T. Moore II, who agreed to hear the case.

In just 24 hours, Sparks had to have a 125-page opening brief delivered to the court, with a copy to a judge who lived in a beach community 100 miles from Wilmington.

He wrote the legal arguments in longhand, finished at 3 a.m., slept 2 1/2 hours and went back to work anticipating Mesa’s response--a 95-page brief due the next afternoon.

The hearing started at 9:30 a.m. May 16. For an hour and 45 minutes, Sparks made the case for Unocal, and Delaware corporate lawyer Charles F. Richards Jr., made one for Mesa.

About 100 people returned to the courtroom the next morning to hear the decision. No one was permitted to leave the courtroom until Moore finished reading.

Sparks promised himself that no matter what the decision, he would allow no expression to cross his face. When he heard Moore describe Mesa’s offer as a “grossly inadequate and coercive two-tier front-end loaded tender offer,” he was 99% sure he had won. He had.

Moore finished in 14 minutes, and the room cleared in what seemed to Sparks like a tenth of a second. He and Richards shook hands, and five minutes later Sparks was back in his office.

His first call was to Sam Snyder in Los Angeles. “I found out yesterday that I am being promoted to general counsel, and now you’ve just told me there will be a company for me to be general counsel of,” a happy Snyder said.

As Sparks talked to Snyder, Bogen was taking a call from a lawyer for the Pickens group. With no significant avenues of appeal, Pickens was ready to go back to the bargaining table.

The Price of Peace

The Pickens team had prepared for a possible defeat in Delaware, but it considered the chance remote. Now, no one was in a mood to discuss strategy to keep the battle going.

By not being included in the Unocal offer, the Pickens group had just suffered a “paper” loss on its investment of almost $300 million, nearly half of Mesa Petroleum’s net worth.

What’s more, Pickens figured that if he came back with an offer for all the stock, Unocal would simply make another exclusionary offer of its own. Eventually, he would own all the remaining shares of Unocal but because of all the new debt being created, he would own a virtually bankrupt company.

He decided to settle but not without a contingency plan. Initial phone calls made it plain that Hartley wasn’t yet in the mood to settle.

Pickens’ backup plan was more or less thus: On Monday, Unocal was expected to commit to its offer to buy 50 million shares. On Tuesday, Mesa would offer $45 a share for the remaining 100 million shares. The blended Unocal-Mesa offer: $54 a share. Mesa was prepared to go as high as a blend of $58.

Friday and Saturday went by, and Hartley wasn’t budging. He didn’t want to go beyond the original 50 million shares. He didn’t want Mesa to get any part of the $72 offer, and thus reap a huge profit. And he wanted Pickens to pay all the expenses--for both sides.

By Sunday, however, Hartley began to change his mind. The Delaware victory, he realized, would not prevent Pickens from buying more Unocal stock and prolonging the battle. And he was angry that federal agencies had not responded to his call for action to curb hostile corporate takeovers--particularly Pickens’ bid for Unocal.

The Unocal team assembled at 8 a.m. in the dungeon.

By then, the Mesa troops had given up hope of more talks Sunday. Its lawyers had flown home. Batchelder and Tassin took their families to a lake near Amarillo for a barbecue.

They had told Unocal negotiators that they wanted four things: promises that they would be included in the $72-a-share offer, that other shareholders would not have fewer shares repurchased because of Mesa’s inclusion, that both sides would pay their own expenses and that any agreement barring Drexel from raising funds for another Unocal bid be limited to three years. Hartley wanted 50.

Batchelder and Tassin hadn’t been at the lake an hour when the call came from Los Angeles: Unocal agreed to all the points except one. Hartley wanted Pickens to pay Unocal’s expenses.

When Batchelder balked, he got an oral commitment that Hartley would come around on that point as well. Batchelder was back in Los Angeles by 10 p.m.

The two sides were to meet at the Gibson, Dunn & Crutcher offices on the 48th and 49th floors of the Crocker Plaza downtown.

Unocal was on the 48th and Mesa on the 49th, and about every hour they would meet. At the start Hartley still insisted that Pickens pay all expenses and he wanted 50-year “standstill” agreements from both Drexel and Mesa.

After several hours, those sticking points were resolved. Each side would pay its own expenses, and Drexel agreed to a three-year standstill and Mesa to 25 years.

They worked through the night, hammering out the remaining details. Then at 6:55 a.m. Monday, Unocal called the New York Stock Exchange to advise that settlement talks were under way and to ask that trading in the company’s stock be halted.

Snyder called Hartley at 7:30 a.m. and asked him to set up a board meeting for that afternoon and warned him not to talk to the press at the reconvened annual meeting that morning at 10 a.m., which was to last only a few minutes because the votes still weren’t counted. (Eventually, the company announced that the Pickens proposals were defeated.)

By 9 a.m., a tentative agreement was ready.

While the Pickens team waited, Unocal strategists met with company directors over lunch. “I was so tired I didn’t see who was there,” Snyder said later. “I looked around the table and saw a bunch of people who looked like the directors and I recognized Mr. Hartley and that was good enough.” One exhausted Unocal lawyer fell asleep briefly during the meeting.

The documents were signed by 5 p.m.

By 6:30 p.m., Batchelder was on a plane for Amarillo and Snyder was in bed.

Pickens, who had been in Scottsdale, Ariz., giving a speech that morning, quietly flew home to Amarillo. Later, he insisted that his group will make a profit on its Unocal investment, even though many industry analysts believe that his loss could run as high as $100 million.

That night, Hartley celebrated by taking his family to dinner at a Torrance restaurant near his home. As he was leaving the annual meeting that morning, before the settlement was official, he smiled when asked if Unocal’s defensive strategies will be used as a model in future takeovers.

“I’ll be giving lectures on this for the next 20 years,” he said.