In re Pure Resources, Inc. Shareholders Litigation

Facts

Unocal Corporation owned 65.4% of Pure Resources, Inc., a company formed when Unocal spun off its Permian Basin operations and combined them with Titan Exploration. The remaining 34.6% of Pure was held by former Titan stockholders, including Pure’s management. Several agreements governed the relationship between Unocal and Pure, including a Stockholders Voting Agreement that gave Unocal the right to designate five of Pure’s eight directors, a Business Opportunities Agreement limiting Pure’s operations to certain geographical areas, and Put Agreements giving Pure’s management the right to sell their shares to Unocal at a formula price upon certain triggering events. In August 2002, Unocal announced an exchange offer to acquire the remaining shares of Pure at an exchange ratio of 0.6527 Unocal shares for each Pure share. Pure’s board formed a Special Committee of two independent directors to evaluate the offer, but when the Committee sought broader authority to block the offer through defensive measures, Unocal-affiliated directors intervened to limit its powers. The Special Committee ultimately recommended against the offer, but did not have the power to block it. The offer was conditioned on a majority of the minority tendering, but included within the “minority” stockholders affiliated with Unocal and Pure management.