Mesa Settles Long-Running Unocal Suit
Turning out the footlights on a brief but blazing 1985 takeover attempt, Mesa Inc., the Dallas energy company run by Boone Pickens, agreed Wednesday to pay more than $42 million to settle a long-running lawsuit with Unocal Corp.
The civil suit--the last to be resolved of the dozens brought in the wake of Pickens’ run at Unocal--was brought by a suspicious shareholder and later joined by Unocal. It charged that Pickens had broken U.S. securities laws by buying and selling substantial amounts of stock during a period when he was considered an insider of the company.
Wednesday’s settlement, totaling $47.5 million, gives Unocal less than a third of what the oil company was seeking. Mesa, formerly known as Mesa Petroleum, will pay $42.8 million and third parties are to pay the remaining $4.7 million.
The suit arose after a bitter, three-month battle turned into a personal grudge match between Pickens and Unocal’s strong-willed chairman, Fred Hartley, and left Unocal hip deep in billions of dollars of debt--a legacy from which the company is still recovering.
At a time when oil companies were awash in cash from $30-a-barrel crude, Pickens draped himself in the rhetoric of the aggrieved outside shareholder. He denounced both Unocal’s return to shareholders and Hartley perquisites such as having a piano on the company plane.
A pivotal court decision against Pickens was “a real killer blow to the shareholders in corporate America,” the Texan protested during the fight.
Hartley was not easily cowed. Ultimately, though, Unocal--in what many described as a case of “greenmail”--offered to buy back its shares from Mesa in exchange for secured notes at higher-than-market prices. Unocal management had fought off Pickens--but by acquiring $4.5 billion in debt.
Had the lawsuit settled Wednesday gone to trial as scheduled next month in U.S. District Court in Los Angeles, a familiar crew of ‘80s financial figures might have taken the stand.
Financier Michael Milken, stock trader Ivan Boesky and brokerage chief Boyd Jefferies--each convicted of financial wrongdoing during that decade--would have been called as witnesses, according to Patrick Coughlin, a partner in the San Diego office of Milberg Weiss Bershad Hynes & Lerach, which filed the suit against Mesa.
Milken “notified us last week that he intended to testify this time,” Coughlin said Wednesday, “despite taking the Fifth Amendment when his deposition was taken in 1989. And Boyd Jefferies was coming. . . . And Boesky was within the jurisdiction and we intended to subpoena him.”
The suit charged that Pickens used Jefferies as his agent in assembling the block of Unocal shares at issue in the case. According to Coughlin, Jefferies--who headed Los Angeles-based Jefferies & Co.--bought the stock from Milken, Boesky and investor Irwin A. Jacobs.
In May, 1985, Pickens dropped his takeover attempt and sold his Unocal stock--including the shares addressed in the lawsuit, yielding a profit estimated by the plaintiffs at $99 million.
David Colan, a California engineer and Unocal stockholder, then brought civil suit against Mesa. Citing securities laws, he demanded that Pickens, as a Unocal insider, turn back to the company any profits from certain stock sales made within six months of the shares’ purchase.
“Bringing the Unocal litigation to an end as quickly as possible was critical for Mesa,” Pickens said Wednesday. The company, he said, was thwarted from dealing with its own debt problem as long as “uncertainty” remained from the suit.
Indeed, Mesa stock gained $1 to close at $7 a share Wednesday in New York Stock Exchange trading. Unocal closed down 37.5 cents at $28.25 a share.
Almost a decade after the bitter takeover attempt, the fortunes of Mesa and Unocal have taken different paths.
Unocal still carries $3.4 billion in debt, but the company has drastically restructured and has rebounded with growing profits. For the third quarter of 1993, Unocal posted net earnings of $70 million, up from $11 million in the third quarter of 1992.
With Wednesday’s settlement, the much smaller Mesa is $1.3 billion in debt. For the third quarter, it lost more than $27 million, compared to a $29-million loss in that period a year earlier.
And Pickens’ United Shareholders Assn.--the shareholders’ rights group he set up during his takeover days--quietly ceased operating two weeks ago.
