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Business Assoctiations Keyed to Gabalson, 3rd Ed.
Unocal Corporation v. Mesa Petroleum Co.
Citation:
493 A.2d 946 (1985)Facts
On April 8, 1985, Mesa Petroleum, which owned about 13% of Unocal’s stock, commenced a two-tier tender offer for 37% of Unocal’s outstanding stock at $54 per share in cash, with the intention to acquire the remaining shares through a “back-end” merger using subordinated debt securities. Unocal’s board, consisting of eight independent outside directors and six insiders, met on April 13 to consider the offer. After extensive presentations from legal counsel and financial advisors, the board determined that Mesa’s offer was grossly inadequate and coercive. On April 15, the board approved a defensive exchange offer for 49% of Unocal’s shares at $72 per share in senior debt securities, explicitly excluding Mesa from participation. The board reasoned that including Mesa would effectively finance Mesa’s inadequate offer and defeat the purpose of protecting shareholders from Mesa’s coercive tactics. Mesa challenged this selective exchange offer in court as discriminatory and a breach of fiduciary duty.
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