Pickens Group Says It Bought 7.9% Stake in Unocal as ‘Investment’

Mesa Partners, an investor group headed by Texas oilman T. Boone Pickens, disclosed Thursday that it has quietly acquired 7.9% of the outstanding stock in Los Angeles-based Unocal Corp., parent of Union Oil Co. of California. But the group insisted that it has no present plans to seek control of the firm.

The announcement ended months of speculation that Pickens, chairman of Amarillo, Tex.-based Mesa Petroleum Co., was behind the recent surge in the price of Unocal’s stock. The company has been considered a possible takeover target for more than a year, but trading in its stock has become volatile only in the last few weeks.

Despite the Pickens group’s denial that it wants to take over Unocal, its stock purchase raised concern that Unocal may soon become embroiled in the same frantic defense maneuvers that Phillips Petroleum Co. is currently taking to maintain its independence.

Continuing to Buy Stock

In a filing with the Securities and Exchange Commission, Mesa Partners said it is continuing to buy stock in Unocal and may increase its total investment to $1.2 billion, which would raise Mesa’s stake to more than 15%. The filing specifically stated that the group “does not presently intend” to seek control of the company, and Pickens reiterated that position in an interview late Thursday.

“We’re trying to do the best we can with what capital we have to work with,” Pickens said of the partnership. “We saw it (Unocal) as an undervalued situation, and we made the investment. I can’t make it any clearer than to say we bought it for investment purposes.”

However, Pickens’ habit of attempting to take over oil companies--he made unsuccessful efforts to acquire both Phillips and Gulf Oil Corp. last year--raised speculation among analysts that he may launch a tender offer for Unocal’s stock. Analysts say Unocal Chairman Fred L. Hartley, who a few days ago announced that the company is “not for sale,” would mount a vigorous defense.

Tough Fight Predicted

“Hartley does not strike me as an individual who would roll over,” said John Curti, an analyst with the San Francisco-based brokerage firm of Birr, Wilson & Co. “I think he’s going to put up a tougher fight than most people think.”

Unocal officials declined to comment on the Mesa disclosure, and a spokesman said Hartley was not available for an interview.

The announcement by the Mesa group was made after the close of the New York Stock Exchange, where Unocal stock was unchanged at $48. The stock price was as low at $34 a share only a month ago.

In its filing, the Mesa group said it began buying Unocal stock in October and paid an average of $42.38 a share for the 13.78 million shares it has acquired thus far, for a total investment of $584 million. The group said it may spend another $616 million buying stock in the company.

Mesa Partners consists of Mesa Petroleum and Wagner & Brown, an independent oil company based in Midland, Tex., that is owned by Jack E. Brown and Cyril Wagner Jr. The group last December launched a $60-a-share tender offer for 15% of Phillips but reached an agreement with the company a few weeks later that will result in the partnership’s receiving $53 a share for its 8.9 million shares, for a profit of about $89 million.

Pickens’ effort to acquire Gulf in early 1984 started the events that led to the eventual takeover of that company by San Francisco-based Chevron Corp., giving the Mesa group a profit of $760 million for the Gulf stock it had accumulated.

“We believe there is potential for substantial appreciation in the market value of Unocal shares,” Pickens said in a statement Thursday. “The ongoing restructuring in the oil industry has created significant values for shareholders of many companies. We believe that Unocal may ultimately participate in the restructuring process as a means of increasing the value of its shareholders’ investments.”

Analysts say Unocal has established defensive barriers in the last year to make an unfriendly takeover more difficult. These include staggering the terms of the board of directors and requiring approval of any takeover by 75% of the shares. However, Unocal has not adopted tactics used by other oil companies such as repurchasing its stock or spinning off certain assets into separate companies.

Unocal Corp. at a Glance Holding company for Union Oil of California, an integrated oil company.

1984 1983 Revenues $11.54 billion $10.69 billion Profits $700.4 million $625.9 million Oil reserves NA 715 million barrels Oil production 235,000 bbls/day 226,000 bbls/day Gas reserves NA 6.37 trillion cubic feet Gas production 1.065 billion cf/day 982.5 million cf/day

12-Month Thursday’s High Low Close Stock Price Per Share $50 $30 $48