UNOCAL CORP. V. MESA PETROLEUM CO. , 493 A.2d 946 (1985) CASE BRIEF

UNOCAL CORP. V. MESA PETROLEUM CO.

493 A.2d 946 (1985)

NATURE OF THE CASE: This a resolution of the issue of a self-tender which excludes participation. Unocal (D) appealed from a decision granting a preliminary injunction to Mesa (P) and enjoining an exchange offer of D for its own stock.

FACTS: On April 8, 1985, Mesa, the owner of approximately 13% of D stock, commenced a two-tier format loaded cash tender offer for 64 million shares, or approximately 37% of D's outstanding stock at a price of $54 per share. The back end was designed to eliminate the remaining publicly held shares by an exchange of securities purportedly worth $54 per share. However pursuant to an order of the District Court, P issued a supplemental proxy statement to D's stockholders disclosing that the securities offered in the second-step merger would be highly subordinated, and that D's capitalization would differ significantly from its present structure. D's board met to consider the proposal. They were not given any agenda or written reports beforehand, only a detailed presentation at the meeting. The board received a presentation from one Sachs who discussed the basis for their opinions that the P proposal was wholly inadequate. He presented the board with various defense strategies available to them. The eight outside directors met in private to discuss matters with D's financial advisors and attorney. They agreed to reject the offer. The board then reconvened and unanimously adopted a resolution rejecting as grossly inadequate P's offer. On April 15, the board met again with four of the directors on the phone and one absent. The board's resolution provided that if P acquired 64 million shares of D's stock through its own offer, D would buy the remaining 49% outstanding for an exchange of debt securities having an aggregate par value of $72 per share. It also stated that the offer would be subject to other conditions that had been described to the board at the meeting, or which were deemed necessary by D's officers, including the exclusion of P from the proposal. D's exchange offer was commenced on April 17 and P promptly responded by filing this suit in the Court of Chancery. The board met again and the directors were advised to waive the P purchase condition as to 50 million shares. Another point was the exclusion. D's attorney advised that board that under Delaware law, P could only be excluded for what the directors reasonably believed to be a valid corporate purpose. On April 24, 1985, D issued a supplement to the exchange offer describing the partial waiver of the Mesa Purchase Condition. On May 1, 1985, in another supplement, D extended the withdrawal, proration and expiration dates of its exchange offer to May 17, 1985. Meanwhile, on April 22, 1985, P amended its complaint in this action to challenge P's exclusion. On April 23, P moved for a temporary restraining order in response to D's announcement that it was partially waiving the P's Purchase Proposal. D was temporary restrained. D sought certification of interlocutory appeal and the Vice Chancellor denied to certify the appeal on the grounds that the decision granting a temporary restraining order did not decide a legal issue of first impression, and was not a matter to which the decisions of the Court of Chancery were in conflict. However, On May 2, 1985, we concluded that the temporary restraining order was an appealable decision. However, because the Court of Chancery was scheduled to hold a preliminary injunction hearing on May 8 at which there would be an enlarged record on the various issues, action on the interlocutory appeal was deferred pending the outcome of those proceeding. On the May 8th hearing, P were granted a temporary injunction. On May 13, 1985, the Court of Chancery certified this interlocutory appeal to us as a question of first impression, and we accepted it on May 14. The Court of Chancery granted a preliminary injunction to the Mesa Petroleum CO., Mesa Asset Co., Mesa Partners II and Mesa Eastern, Inc. (Ps), enjoining an exchange offer of the Unocal Corp. (D) for its own stock. The trial court concluded that a selective exchange offer, excluding P was legally impermissible.

ISSUE:

RULE OF LAW:

HOLDING AND DECISION:

LEGAL ANALYSIS:

Get free access to the entire content for Mac, PC or Online

for 2-3 days and free samples of all kinds of products.

https://bsmsphd.com

© 2007-2016 Abn Study Partner