Unocal Can’t Exclude Pickens From Its Offer, Delaware Judge Rules

T. Boone Pickens Jr. cannot be excluded from Unocal’s lucrative offer to buy back 29% of its own shares for $72 per share, a Delaware state court judge ruled Monday in granting the Pickens group a temporary restraining order against the stock repurchase plan.

Unocal, which is trying to stop a Pickens-led investor group from gaining control of the Los Angeles-based oil company, had no immediate comment on the decision or on the matters that were discussed at Monday’s regularly scheduled meeting of Unocal’s board. But the company is expected either to appeal the decision or to erect yet another anti-takeover defense.

The ruling “is a fairly serious problem� for Unocal, said Terry O. Kelly, a lawyer with the Los Angeles firm of McKenna, Conner & Cuneo, who has been following the bitter takeover battle. He expects Unocal to appeal the decision.

By requiring Unocal to allow Pickens to take part in the buy-back, the Delaware court put Unocal in the awkward position of helping the group that is trying to take it over. The case is being argued in Delaware because Unocal is incorporated there.

May Alter, Withdraw Offer

If the ruling by Delaware Chancery Court Judge Carolyn Berger remains in force, however, Unocal must decide whether to drop its tender offer for 50 million of its own shares, alter the plan in such a way that the Pickens group’s takeover bid would not be benefited or add the investor group’s 23.7 million Unocal shares to the pool of other tendered shares.

Under the terms of Unocal’s tender offer, the company has the right to alter or withdraw its offer, which was open to any stockholder except the Pickens group. But Unocal Chairman Fred L. Hartley, in an interview last week, indicated that Unocal would proceed with the offer regardless of how the court ruled.

Less than an hour after Berger’s ruling in Delaware, a federal judge in Los Angeles denied a request by the Pickens group for a preliminary injunction against the exclusion that Judge Berger had ruled illegal.

U.S. District Judge A. Wallace Tashima found that the section of the federal securities laws under which the Pickens group challenged the exclusion as discriminatory doesn’t apply in this case.

The two rulings don’t appear to conflict because Tashima said he wasn’t ruling on the merits of the case. The Delaware ruling is the one to watch, the lawyers said.

Second Victory for Pickens

Monday’s ruling was the second legal victory in three days for the Pickens group. On Friday, Judge Tashima in Los Angeles ordered a two-week postponement of Unocal’s annual meeting after finding misleading statements in both Unocal’s proxy materials for its annual meeting and in the Pickens group’s competing tender offer for 64 million Unocal shares. The meeting, originally scheduled for April 29, has been reset for May 13.

Despite the judge’s finding that both sides issued misleading information to shareholders, Friday’s ruling was viewed as favorable to the Pickens group because any delay gives it time to round up support for the single request that it wants to make at the annual meeting: That the meeting should be adjourned for another 60 days.

Pickens, chairman of Mesa Petroleum of Amarillo, Tex., called the Delaware decision a victory for his group and for stockholder ownership rights.

“I have been saying that we’re at a crossroads in corporate America . . . over who owns companies,� Pickens said, “and Judge Berger in effect said stockholders do. That’s great.�

Pickens said his group intends to tender its shares unless Unocal withdraws its offer, a move that several sources close to the takeover fight expect.