T. Boone Pickens, the affable oil maverick from Amarillo, Tex., thrust his hand at the 68-year-old man hurrying through the marble-floored corridor of Washington’s Long-worth Building. “Hi, Fred. How ya doing?” he asked heartily. Without breaking stride Fred Hartley replied, “Go away.” Both Hartley and Pickens were preparing to testify last month before a U.S. congressional committee investigating takeovers in the oil industry. Hartley, the irascible president of Unocal Corp. of Los Angeles, and Pickens, the consummate corporate raider, had been locking horns since February over Unocal, the United States’ 13thlargest oil company and the maker of Union 76 gas. Last week, seven weeks after their brief encounter in Washington, Hartley emerged victorious from the oil industry’s fiercest takeover battle yet when Pickens announced that his Mesa Partners II group would abandon the attempt and accept a loss—the first ever for a Pickens-led takeover.
For Hartley and Unocal the key to victory had been won three days earlier in Delaware, where the company is incorporated. The state Supreme Court confirmed Unocal’s right to buy back 50 million of the company’s 174 million shares at $72 each from any Unocal shareholders—while excluding Pickens or his associates. Pickens had contended that his exclusion was contrary to the principle of equal treatment for all shareholders. But the court ruled that the offer was a legitimate “business judgment”—a decision that rocked the takeover fraternity and Wall Street.
Pickens decided to retreat. Under an arrangement with Unocal, the company would buy back about nine million of the Mesa group’s 23.7 million Unocal shares at the attractive $72-a-share rate. But Mesa will have to give back to Unocal $100 million in debentures. And the group will lose much more if, as industry analysts expect, it sells its remaining Unocal shares on the open market at the current price of about $36 a share. (Mesa paid an average of $46 a share.) For Pickens, who has reaped an estimated $700 million in six takeover manoeuvres since 1982, it means a loss of between $80 and $130 million.
But for Hartley the victory is bittersweet. Unicoi’s share buy-back will quadruple its debt, to $5.3 billion, and reduce its room to manoeuvre should one of Pickens’s fellow raiders lay siege to the company. Indeed, Hartley’s problems may be just beginning.
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