Unocal Goes Out with a Bang


By Christopher Palmeri The final meeting of Unocal shareholders came off like a Sunday morning talk show, as participants voiced often-clashing views on one of the most politically charged corporate merger battles in U.S. history.

An overwhelming majority approved the $17.5 billion merger with Chevron (CVX) on Aug. 10. But some still stood up to criticize the sale of the company.

FATEFUL PROVISION. Unocal Chairman and Chief Executive Charles Williamson brought the question-and-answer period to an end at 10:41 a.m. Pacific time, 30 minutes after it began, saying the dialogue could have gone on all day. The 115-year-old oil company officially ceased to exist about two hours later.

Williamson said Unocal considered a sale only after being approached months ago by China National Offshore Oil -- known as CNOOC (CEO) -- which wanted to buy the U.S. oil company. Unocal then solicited offers from other outfits, ultimately choosing Chevron on Apr. 4.

CNOOC's efforts to buy the company for a higher price were dashed when Congress slipped a provision into the recently signed energy bill that would require extensive federal hearings on the sale to a Chinese company. Citing that development, CNOOC withdrew its $18.5 billion offer on Aug. 2.

"CONFLICT OF INTEREST." Emil Bereczky, a former Unocal engineer, read a statement saying he thought management was doing a disservice to employees and shareholders by selling the company. He noted the response of former Unocal chairman Fred Hartley, who fought off a hostile takeover from T. Boone Pickens 20 years ago.

Bereczky said he felt Morgan Stanley's "fairness" opinion of the $63-a-share price provided was inadequate. He also criticized the $112 million severance package awarded to Unocal's eight most senior managers. "Management is killing the company to get millions in benefits for themselves," he said. "It's a conflict of interest."

Patricia Hearst -- not the once-kidnapped heiress but a former member of the Hearst family by marriage -- disagreed. Hearst said she had been a friend of former chairman Hartley and his wife, and that, although a sale of the company "brought her to tears," management had done a good job. "Because we're staying in this country, I support the merger," she said.

THE EARLY DAYS. Shareholder George Foley argued against the Chevron deal on geopolitical grounds. "This whole thing was handled so badly," he said. "The Chinese really got the shaft. They have long memories."

Foley noted that China is both a top trading partner and a huge holder of U.S. debt. He lamented that members of Congress are prone to trading their influence for campaign funds, and he faulted investment bankers for signing off on opinions that he said they knew company management wanted to hear. "Unocal has always stumbled and, just when times are going in the right direction, we sell," he added.

Founded as Union Oil Company of California in 1890, Unocal ultimately acquired large oil and gas reserves in Southeast Asian markets, including Indonesia, Thailand, and Burma (now known as Myanmar), assets that made it attractive to international energy giants. Bringing those big overseas fields online takes time, however, and Unocal's production growth in the past decade has disappointed.

OVERWHELMING VOTE. More recently, those results had improved. The company sold its "76" brand gasoline stations in 1997. Conoco Phillips (COP) now owns them.

Williamson defended the board's handling of the Chinese offer, saying that any political maneuvering in Washington was Chevron's doing and that Unocal "always treated CNOOC fairly." He said the board had "seriously entertained" that offer.

Ultimately, 77% of Unocal shareholders voted in favor of the Chevron merger. Only 3% voted against. Elizabeth Phillips, a retired commercial photographer who says Unocal shares were the first stock she bought in the mid-1960s, may have summed up the views of many longtime stockholders. "I don't know why they are selling," she said. "But if they're in the mood to sell, I'd rather it go to Chevron."

Now it's a done deal. Palmeri is a correspondent for BusinessWeek in Los Angeles


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