Unocal Corp., defending itself against a takeover attempt by a group led by Mesa Petroleum Co. Chairman T. Boone Pickens Jr., took a page right out of Pickens' book of shareholder populism yesterday.
The Los Angeles-based oil company said its executive committee would recommend to the Unocal board that the company spin off its considerable oil and gas reserves in the Gulf of Mexico into a master limited partnership that would be jointly held by the company and shareholders.
The unusual device recalls the royalty trust arrangement Pickens proposed for one of his previous targets, Gulf Corp., as a way to give shareholders greater benefit from an oil company's petroleum-producing assets.
Analysts said yesterday that the limited partnership plan would have a similar effect on Unocal, offering shareholders considerable benefit in addition to the stock holding in the company -- enough, perhaps, to make the shareholders reject Pickens' $3.4 billion bid for majority control of Unocal.
"It's an interesting development," said oil-industry analyst Rosario Ilacqua of L. F. Rothschild Unterberg Towbin. "It may put Mr. Pickens and his group in a position in which they may have to change their offer."
Pickens could not be reached for comment yesterday. But David Batchelder, Mesa's treasurer and a top adviser to Pickens, complained that the proposal was only intended to confuse the issues in Pickens' offer for Unocal. Batchelder said the proposal "just takes assets from one pocket to another" and added that the same changes in tax law last year that made royalty trusts less attractive and ended Pickens' advocacy of them also made the limited partnership concept of questionable value.
Pickens, whose group already owns 13.6 percent of Unocal, is bidding $54 a share for enough to give the group 51 percent of the company, which was formerly known as Union Oil Co. of California. Pickens' group would then complete the takeover with an offer for the remaining stock that analysts believe would be worth somewhat less than $54 a share.
Ilacqua reckoned that the plan proposed by Unocal yesterday could be worth about $50 a share, perhaps more than the overall value of Pickens' bid. Unocal stock closed on the New York Stock Exchange yesterday at $47.50, up 75 cents, and was the day's most actively traded issue.
Analysts said Unocal's proposal could be particularly attractive to the company's shareholders if the company can succeed in thwarting Pickens' buyout attempt. Unocal has already taken several other steps to complicate Pickens' plans, most recently a "poison pill" offer that would pay $72 a share to remaining Unocal stockholders if Pickens got 51 percent of the company.
The arrangement proposed by Unocal yesterday would place the company's Gulf Region assets -- which account for about 45 percent of the company's domestic petroleum reserves -- into a partnership to be held by the company and shareholders. Not many details were available yesterday about the plan, but analysts speculated that Unocal would retain ownership of about 90 percent of the partnership and offer shares in the remaining 10 percent to the public.