Gulf Oil Corp. postponed indefinitely yesterday its purchase of Cities Service Co. shares, giving the company time to contest Federal Trade Commission objections to the $5.13 billion merger and to work out a possible settlement with the FTC.
The postponement is in line with a temporary restraining order issued Thursday by U.S. District Judge Charles R. Richey at the request of the FTC to block Gulf's purchase of the Cities Service shares.
Richey yesterday set Aug. 16 as a date for a hearing on the FTC's request for a preliminary injunction blocking Gulf's acquisition of Citgo.
The judge asked the two sides to expedite the preparation of the case so that it can be heard before an extension of the restraining order expires Aug. 19. A day later, Cities Service shareholders who have tendered, or promised, their stock to Gulf can withdraw it if it has not yet been paid for under the $63-a-share offer.
Gulf said yesterday it was extending the period during which stock can be tendered to it until Aug. 9. The offer had been set to expire last night. But the company also reserved the right to terminate the offer.
Gulf's announcement followed a six-hour meeting of the company's board in Pittsburgh, which caused the session with Richey to be postponed for two hours. A Gulf spokesman would not say why it took the board so long to come to a decision that Wall Street analysts said should have been fairly simple. But analysts speculated that the Gulf board may have been having second thoughts on the merger.
Gulf's statements in court yesterday indicated the deal was still alive. Donald Kempf, an attorney for Gulf, told Richey yesterday that Gulf would "litigate and litigate vigorously" against the FTC's objections.
The FTC said earlier this week it would seek to block the merger because a combination of Gulf and Citgo would restrict competition in gasoline and jet fuel marketing and petroleum pipeline transportation on the East Coast and in the Southeast.
Kempf said yesterday that those objections "are minuscule in terms of the balance of the transaction," and as a result, Gulf would fight the FTC's ban. Gulf has said it is interested in acquiring Cities Service to get its oil and natural gas reserves, and analysts believe the disputed areas are of less interest to Gulf.
Kempf, however, said Gulf and the FTC would continue to search for a solution to their differences that would allow the merger to proceed, even as the court battle continues. "We will simultaneously be trying to negotiate a settlement with the FTC," he told the court.
Analysts have speculated that Gulf could satisfy the FTC by divesting the disputed operations, although the two sides are apparently far apart on how that would be accomplished.