In its continuing effort to keep T. Boone Pickens at bay, Unocal altered a previous offer and said it will buy 50 million shares of its common stock for $72 per share in senior secured notes even if the Pickens investor group fails in its attempt to purchase about half of Unocal's stock.
Pickens branded the move as an attempt to buy votes to support Unocal at Monday's annual meeting. Pickens advised shareholders to tender their shares to Unocal to take advantage of the $72-per-share offer but to vote with his Mesa Partners II investor group in adjourning the annual meeting for two months.
The Pickens group says an adjournment will give shareholders more time to consider its proposals.
"Don't let them buy your vote," Pickens told a crowd of more than 200 people at a Mesa-sponsored informational meeting for Unocal shareholders in Los Angeles.
"I think you should tender to the $72 offer; I think you should vote for adjournment," he said. "Let's see what happens on this adjournment and then we'll come forth with some strategies."
Separately, Unocal reported that net earnings for the first quarter rose slightly to $180.7 million from $180.1 million in the first quarter of 1984. First-quarter revenue was $2.78 billion, compared to $2.68 billion in the same period last year.
Gains Are Offset
The company said gains from higher geothermal production and average sales prices plus higher earnings from foreign oil and gas operations were offset by lower earnings from domestic oil and gas operations because of lower crude oil and natural gas prices.
Oil analyst M. Craig Schwerdt of Morgan, Olmstead, Kennedy & Gardner of Los Angeles called the results "a very respectable showing" considering that other major oil firms have reported lower first-quarter results.
Unocal last week offered to exchange 87.2 million shares for the $72-per-share senior secured notes, but only if the Pickens group were successful in completing its tender offer. That offer would burden Unocal with $6.3 billion in new debt, wiping out the company's net worth and making Unocal less attractive to the Pickens group because company assets would be pledged to the new notes.
Pickens has denounced that offer as "just another poison pill in a new bottle."
A Unocal spokesman declined to say why the company decided to waive the original conditions for buying 50 million shares, but analysts speculated that Unocal had to propose a concrete, unconditional offer to mollify its shareholders.
Most Active Issue
Unocal's stock was the most actively traded issue Tuesday on the New York Stock Exchange with 5.5 million shares changing hands. Unocal's stock closed at $49.25, up $1.25.
Energy analyst Herbert Hart of San Francisco-based S. G. Warburg, Rowe & Pitman, Akroyd said institutional shareholders Monday and early Tuesday "were still inclined to tender their stock to Pickens, and probably Unocal was getting that same feeling. In order to counter that, they felt they had to make some kind of firm offer."
Analysts read Pickens' move in urging shareholders to tender to Unocal as a temporary shift in emphasis away from its tender offer and toward postponing the annual meeting. Then, they speculated, the Pickens group could come back with a tender offer for all of Unocal's remaining 124.7 million shares, probably at a price lower than the current $54-per-share offer.
David Batchelder, financial vice president of Mesa Petroleum, which owns 90% of Mesa Partners, said the investor group has been calling major institutional shareholders and urging them to vote for adjournment of the annual meeting. "We're doing good," he said.
Security Pacific, which has indirect voting power over 9.7 million Unocal shares as trustee for the company's employee stock ownership and profit-sharing plans, will be meeting over the weekend to decide how to vote those shares not directly voted by shareholders.
Lawrence Garshofsky, an arbitrageur with Kayne Anderson & Co. of Los Angeles, said he thinks the overall vote on adjournment will be close but in Pickens' favor.
Unocal said its board approved the partial waiver of conditions on its exchange offer at a meeting Monday. The purchase of 50 million shares is subject to the same terms and conditions as its previous offer, made April 17, including not allowing the Mesa group to tender its shares under the offer. Like the original offer, the proration period expires Tuesday and the offer expires May 14.
Unocal said it will buy an additional 37.2 million shares under the terms of its earlier offer if the Mesa group accepts 64 million Unocal shares for purchase. Unocal reserved the right to waive that condition. The Unocal board recommended that shareholders tender all of their shares to Unocal and that they reelect the company's three nominees for director, including Chairman Fred L. Hartley.