Pickens Group to Make Offer for Shamrock

A partnership led by corporate raider T. Boone Pickens Jr. will offer Diamond Shamrock Corp. a $2-billion stock trade in an effort to gain control of the struggling energy company, officials said Tuesday.

The partnership will file a statement today with the Securities and Exchange Commission spelling out its offer of one Mesa Limited common share for each share of Diamond Shamrock, said David Batchelder, president of Mesa Petroleum Co., another Pickens concern. On Tuesday, Diamond Shamrock stock closed at $13.50 a share, while Mesa closed at $16.875.

Andrew Craig, Mesa Petroleum vice president, said the partnership had already bought 4.5% of the company. “We think their assets are worth more than what the market has traded them at,” he said. “Our bigger reserve areas and theirs match up well.”

Diamond Shamrock released a statement Tuesday night saying its management had not seen the proposal but would evaluate it. Craig said the offer is contingent on Diamond Shamrock’s board rescinding a recently adopted shareholder rights plan that discourages takeovers.

The company posted a $604.7-million loss for 1985 on sales of $4.1 billion and recently reported a third-quarter loss of $97.9 million. But the company recently sold its chemical subsidiary for $800 million, increasing its cash reserves.

Analysts have criticized Diamond Shamrock for its high cost of production and lackluster management that took a turn for the worse last July when the company’s president, J. L. Jackson, was forced to resign.

Alan Edgar, an analyst with Schneider, Burnet & Hickman in Dallas, said he believes that Diamond Shamrock was of interest to Pickens only for its cash reserves of more than $700 million.

“Pickens may be buying it for the cash and is picking on a company that has no credibility on Wall Street,” he said. “This could set the stage to leverage him into a bigger deal very soon.”

The partnership seeking control of Diamond Shamrock is made up of Mesa Limited Partnership, a publicly traded entity that owns virtually all of the oil and gas assets once controlled by Pickens’ Mesa Petroleum, and Harbert Corp., an Alabama construction company.

Pickens, an Amarillo, Tex., oilman who founded a shareholders advocacy group, has previously attempted billion-dollar buyouts of Gulf Oil Corp., Cities Service Co., General American Oil and Phillips Petroleum Co.