Pickens Group Launches Another Raid on Diamond

DALLAS — Less than three weeks after dropping its stock swap offer, a group led by corporate raider T. Boone Pickens Jr. launched another attempt to take over Diamond Shamrock.

Lucky Partners, a partnership led by Pickens that includes Alabama businessman John M. Harbert III, began a partial tender offer Wednesday to buy 20 million Diamond Shamrock shares for $15 each. Analysts said that the offer may be too much for Diamond Shamrock shareholders to resist.

The Pickens group, which includes Mesa Limited Partnership, an Amarillo, Tex.-based energy group, made an earlier bid to acquire the Dallas-based energy concern for securities valued at $2 billion. The company rejected that bid Dec. 18, and the offer was dropped the same day.

“It’s just too attractive,” Don Bustos, an analyst with Duff & Phelps in Chicago, said of the $300-million offer.

Together with the 5 million shares the partnership already owns, the 20 million shares would give the partners about 22.5% of Diamond Shamrock’s approximate 111 million total shares outstanding.

David Batchelder, president of Pickens’ Mesa Petroleum Co., said Lucky Partners’ decision to make the tender offer came as a result of Diamond Shamrock’s “hostile response” to the original offer.

“We’re saying to the shareholders, ‘Look, we want to increase our ownership level and we’re willing to pay $15 a share to do it,’ ” Batchelder said. “We’re intent on acquiring the company.”

On the New York Stock Exchange, Diamond Shamrock’s common stock closed Wednesday at $14.50 a share, up $1.125 from Tuesday.

“We have happy shareholders,” said Batchelder. “This is a stock that hasn’t traded at $15 in over a year.”

Batchelder said the tender offer will be financed primarily from the working capital of Mesa Limited Partnership, which has an 85% commitment in the deal. The remaining 15% would be financed with working capital and borrowing, he said.

Late in the day, Diamond Shamrock released a statement saying the latest tender offer by Lucky Partners is under consideration by Diamond Shamrock’s board and management. The company said its board will make its recommendation to stockholders by Jan. 20. Lucky Partners said its tender offer was limited to 20 million shares because certain provisions of Diamond Shamrock’s “poison pill” anti-takeover measures take effect if a stockholder acquires more than 25% of the company’s stock.

Bustos predicted that the offer will be oversubscribed, and Lucky Partners may end up buying more than 20 million shares but staying under the 25% ownership ceiling.

Lucky Partners said it believes that the offer would “increase the likelihood that the company’s stockholders will receive the opportunity to judge for themselves the merits of any proposal” the partners might make to buy the remaining stock.

The tender offer expires Feb. 4. Once completed, Batchelder said Lucky Partners would make a proposal to acquire the rest of the company’s stock, probably in exchange for common or preferred units of Mesa Limited Partnership stock.