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Gulf Oil

            
            
             This article dealt with the Gulf Oil takeover. of California's (Socal) opportunity came virtually overnight. The Gulf Corporation, the nation's fifth largest petroleum company, had been under siege from an investor group seeking to.
             Gain control of the company and sell it piecemeal for a quick profit. After warding off a takeover bid, Gulf's Board of Directors chose to offer the company up for sale.
             George Keller of Standard Oil Company is deciding whether of not to take it over and how much to bid on the stock. Since there are other competitors also interested in the company, Keller has to make a decision on how much to pay fast. .
             Right now they had a very low ratio which would allow them to bid as high as 79 or 80 since they could easily borrow vast amounts of cash from creditors. This gave them an advantage over ARCO. After acquisition they would be able to handle this high debt to capital ratio in the short run, but would have to be reduced it within the next few years. Its interesting how a few months prior the stock was valued at $40 per share. This is probably because if Keller or the other bidders purchased this company, they would double their reserves of high-quality light oil. .
             Gulf Oil spent a lot of funds on exploration and development. Although a time consuming process, this was extremely valuable for the company by increasing their reserves. Keller is contemplating using these finds which total $2 billion in order to lower their debt to capital ratio. I feel this is a bad idea. Although they would have double the reserves, they would possible jeopardize their future and allow other companies to more find oil. If they continue with the exploration and development this would lift the company to a leading position. I feel it would be better to sell off assets in order to lower the debt. Since this merger would double it's size, they could afford to sell off some of its assets.


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