Frantically Shopping for Suitors

Gulf Oil seeks help to escape a corporate raider

Gulf Oil's headquarters in Pittsburgh is a 44-story office tower that was once the tallest building between New York City and Chicago. Last week the 52-year-old landmark was pumping out a veritable gusher of rumors and speculation. The excited talk was caused by the arrival in Pittsburgh of Robert O. Anderson, chairman of Atlantic Richfield, and George M. Keller, who runs Standard Oil of California. The purpose of their separate visits: to determine, in meetings with Gulf Chairman James E. Lee, if deals could be arranged to buy Gulf, the U.S.'s fifth-largest oil company. A Gulf purchase by either firm could easily be the biggest corporate takeover in history.

Gulf is believed to have opened its books to at least six other potential suitors besides

Arco and Socal, including such non-oil giants as General Electric and Allied. (Another rumored bidder: the government of Kuwait.) The firms were shown the confidential data only after pledging not to make an unfriendly takeover bid for at least three years. According to some Pittsburgh insiders, Gulfs board could meet at any time to discuss possible bids. The asking price could be as high as $80 a share, or $13.2 billion. The firm considered most likely to make that offer was Arco, on whose behalf Chase Manhattan bank was assembling a $12 billion line of credit from as many as 70 lenders to help finance any takeover.

Gulf is entertaining offers because it is frantically seeking a buyer to save it from T. Boone Pickens Jr., chairman of Mesa Petroleum. Although Pickens lost a proxy battle to gain control of Gulf in December, his group holds 13.2% of the oil company's stock. In addition, Pickens has offered to buy an additional 8.1% of Gulf for $65 a share in a tender offer that takes effect at midnight on March 21. If successful, he might go ahead with his plan for a drastic restructuring of the company.

Meanwhile, takeover rumors swirled about another of Big Oil's Seven Sisters last week: Texaco, which only last month completed its $10.1 billion acquisition of Getty Oil, the biggest buy-out on record.

An investor group headed by the Bass family, the billionaire Texas oilmen who already control 9.8% of Texaco stock, reportedly lined up an additional $160 million of financing. That sparked rumors that the Bass brothers were joining forces with Pennzoil, the Houston oil company that was spurned in its bid for Getty, to make an assault on Texaco, the eventual winner.

Those unconfirmed rumors helped push Texaco's stock up $5, to a twelve-month high of $47. Speculation in Gulf stock was equally brisk. Its price climbed $6.88, to close the week at $69.50.

Oil companies have become tempting targets for takeovers in recent months.

With crude prices stagnant, the market value of energy firms is weak and some companies are selling for less than the worth of their assets. At the same time, oil executives are discovering that it is often cheaper to buy new reserves than to explore for them. In Alaska's promising Mukluk field, for instance, major oil companies have put an estimated $1.7 billion into exploration, but have so far turned up only a $140 million dry hole.

With its 725 million bbl. of proven and probable reserves in the continental U.S., Gulf is a particularly rich prize. But fending off Pickens for the past six months has taken its toll in employee morale. Says one insider: "There is a great deal of uncertainty, and with uncertainty has come concern."

A Gulf acquisition by another major oil company would present some antitrust problems, but legal experts do not believe that the Reagan Administration would object. If either Arco or Socal buys Gulf, however, the Government might insist on the sale of some refineries and gas stations to preserve competition.

Whatever happens, the biggest winner of all may be Pickens and his backers, who paid an average price of $45 for each of their 22 million shares. The right tender offer could earn them a profit of nearly $800 million.