Occidental Petroleum Co. launched its $50-a-share tender offer for half of Cities Service Corp. stock yesterday while Cities Service continued to search for a better offer, holding off on a special meeting of its board of directors.
Occidental set a Sept. 16 expiration date for the offer in its formal tender statement filed yesterday with the Securities and Exchange Commission.
A merger between Tulsa, Okla.-based Cities Service and Los Angeles-based Occidental would create the nation's eighth-largest oil company, and 12th-largest industrial concern. The two firms had combined 1981 sales of $23.6 billion.
Cities Service stock was the most heavily traded issue on the New York Stock Exchange yesterday as 2.37 million shares changed hands. The stock jumped 5 1/4 to close at 42 3/4.
Occidental common stock closed at 18 7/8, up 3/8 on 190,900 shares traded.
Wall Street analysts yesterday continued to predict success for Occidental's takeover attempt unless a new bidder for Cities Service comes forward in the next several days.
Alvin Silber, an analyst with Dean Witter Reynolds in New York, said bidders would have to move quickly now that Occidental has gone ahead with its tender offer. "Either they come out soon or they wait in the wings forever," he said.
Analysts predicted that the Occidental tender offer would "smoke out" any potential bidders for Cities Service, if any exist. "I would say that what Occidental did was an invitation for Cities to show its hand," said Osman Erlap, with Bache Halsey Stuart Shields in New York.
Erlap said other potential suitors for Cities Service are likely to come from one of three groups: large American oil companies, foreign investors or a domestic non-oil company seeking to diversify.
Rumors circulated throughout Wall Street yesterday about possible new bidders for Cities Service. Some analysts speculated that Cities delayed its board meeting so it could negotiate with other companies.
The unfriendly Occidental move follows a similar, but solicited offer made by the company a week ago to Cities' board of directors. The $3.8 billion proposal offered $50 a share for half of Cities' stock, and debt and securities for the remaining half.
Cities Service rejected Occidental's proposal Monday night, saying it was holding out for a better offer. Occidental quickly took its takeover bid directly to Cities' shareholders.
Chairman Charles J. Waidelich asked Cities Service shareholders Wednesday to "reserve judgment" on the Occidental bid until the Cities' board meets to discuss it.
The Occidental tender offer made yesterday includes an Aug. 28 "pro ration" deadline, before which Cities Service shareholders must tender their shares to be guaranteed cash for their stock.
If more than 38.2 million Cities shares -- 49 percent of the company's outstanding stock -- are offered to Occidental, it says it will buy the same percentage of shares from each holder.