Pickens faces costly defeat in his bid to get Unocal

T. Boone Pickens Jr. has thrown in the towel -- and may take a bath on this one. A complex tentative settlement may allow Mr. Pickens's Mesa Partners II to break even on their purchases of stock in Unocal, the big integrated oil company based in Los Angeles. But at best, analysts expect the group to incur about a $100 million loss for expenses. This would mark a big defeat for Pickens.

``It's clear to me that he has lost on this one,'' says William Higgins, an oil analyst at Value Line Investment Survey. ``Pickens's average purchase price [of Unocal stock] was in the high 40s, I would guess the most this deal is worth is $44,'' he adds.

The knockout punch was delivered last Friday when the Delaware Supreme Court upheld Unocal's $72-a-share tender offer designed to exclude Pickens's group. That decision prompted the settlement, Pickens said.

In the settlement, one-third of the Unocal shares held by Mesa will now be included in the offer for $72 a share in debt securities. But the rate at which Mesa can sell the rest of its 13.6 percent Unocal stock will be carefully controlled. In effect, Mesa will not be able to sell all of its Unocal stock before early next year. In the meantime, financing costs and a drop in the price of Unocal stock could increase Mesa's losses. And the deal may tie up Pickens resources, thereby hindering any other near-term takeover attempt.

Unocal's $72-a-share offer is expected to boost the 13th-largest oil company's debt load by at least $3.6 billion. The debt may grow if Unocal buys back the remaining shares Mesa owns. At this writing, not all the details of the settlement had been disclosed.

In the past three years, Pickens has tried to take over five other oil companies. He has failed each time, but netted about $700 million for his efforts. With the Delaware court decision, a slew of anti-takeover provisions enacted at annual meetings this year, and now Pickens's Unocal failure, one might think the takeover tide is turning.

``I don't think this setback for Boone Pickens means takeovers will stop,'' opines Mr. Higgins at Value Line. The Delaware ruling may be too specific to be applied again, some legal experts say. And most anti-takeover provisions are rather low hurdles for the raiders, Higgins says. ``Where there's a will, there's going to be a way.''

Separately, the Securities and Exchange Commission decided Monday not to propose a major bill to prevent corporate takeovers. The SEC opted to allow state courts and the marketplace to deal with abusive tender offers.

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