Profit Insurance

Although the world's growing dependence on petroleum seems to guarantee it a prosperous future, Gulf Oil Corp. has been casting a covetous eye on companies in unrelated industries. Last week it announced which it would like to pick: Chicago's CNA Financial Corp. (1972 revenue: $1.6 billion), which has interests in insurance, consumer credit and real estate. Gulf proposes to pay in securities worth roughly $800 million, making the prospective acquisition one of the biggest ever.

By taking over CNA, Gulf management hopes to buy a form of profit insurance. Kuwait, from whose oil fields Gulf gets more than half its worldwide crude supply, put curbs on production last year, and Gulf has been seeking ways to cushion the blow. Taking over CNA would also be attractive for other reasons: Gulf has a lot of excess cash on hand that could be used to greatly expand the insurance company's operations. The special tax benefits that Gulf enjoys as an oil company could provide a tax shelter for part of CNA's already considerable profits (nearly $100 million last year), thereby increasing the combined worth of the two companies. Such benefits appeal especially to Harold H. Hammer, Gulfs chief financial officer, who worked out the proposal. Hammer joined Gulf about a year ago after a clash with his old employer: William C. Norris, the blunt chairman of Control Data Corp., for whom Hammer had put together a string of mergers.

CNA's board appears likely to approve the takeover, even though Gulf is trying to pick up CNA at a bargain price: Gulf securities worth about $19 for each CNA share, only slightly more than the stock's book value of $17.50. But even if CNA's stockholders go along, the deal could still be challenged by state regulators or the Justice Department, which has been unenthusiastic about giant corporate mergers.

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