The board of Cities Service Co. today unanimously rejected the latest offer for the company from Occidental Petroleum Corp. But the board told Cities shareholders to make their own decisions on accepting Occidental's $50-a-share offer for their stock.
And the board said that if Cities -- which put itself on the block earlier this month after the collapse of a $5 billion merger offer from Gulf Oil Corp. -- is unable to find another buyer by Friday, Cities board members and executives might sell their own stock to Occidental.
"In light of the unprecedented circumstances resulting from Gulf's abrogation of its merger agreement with us and the grave disadvantage that has been inflicted on our shareholders, it would be inappropriate for the board to 'second-guess' each shareholder's own evaluation of the Occidental offer," Cities Chairman Charles J. Waidelich wrote shareholders after today's meeting in New York. "Accordingly, each shareholder is advised to make his or her own decision."
The letter also said that Cities is having "serious discussions with a number of highly regarded companies" about selling all or part of the company's assets. It did not say what companies were interested, but it implied that discussions were being held with Occidental, which took its offer to Cities shareholders last week after the board rejected a formal $3.8 billion bid.
The letter said the potential buyers were especially interested in Cities' gas transmission subsidiary and its petroleum refining, marketing and transportation operations. Amerada Hess Corp. said last week it was considering an offer for those Cities Service divisions.
The letter said the board had rejected Occidental's offer because it was "inadequate" financially and because it did not make clear how Occidental would complete a takeover of Cities once it had obtained the 49 percent of Cities' 76.4 million shares desired in the offer. In the original offer declined by Cities, Occidental planned to complete the merger by offering securities evaluated by analysts at $50 or less for each remaining Cities share.