Gulf Oil Case Analysis

Brittany Damato

Danielle Zimmerman

BMGT 440

Section 0301

1. Gulf Oil as a stand-alone company is not valued at $70 per share. This value is attained as projection of the future value of Gulf Oil merged with another profitable firm. Companies willing to offer this price feel as though the market will value gulf oil at a $30 share increase, when combined with another firm. The price is high for most firms to pay and those willing to present offers will incur a large debt if they choose to offer Gulf Oil $70 per share or more. However, these companies feel that Gulf Oil has the potential, with added resources from an acquiring company, to grow and attain more profits in order to cover the loss of the merge.

2. Boone Pickens chose to approach the takeover of Gulf Oil without the mutual consent of the current management. Instead Boone Pickens chose to attempt to attain the majority of shares in Gulf Oil in order to obtain control over the company. Boone Pickens, secured loans from private investors to continue to purchase shares and before Gulf Oil approached alternate companies for a merger on their own terms, Boone Pickens had acquired 21.3% of the shares with clear intentions to pursue more. Boone Pickens could not at that time afford to continue to purchase more shares in Gulf Oil, however they hoped that the amount they currently had and the speed at which they attained that amount of shares, would make themselves a desirable investment for other companies to provide more capital for Boone Pickens to continue their pursuit to be the majority stakeholder in Gulf Oil.

This aggressive move by Boone Pickens to obtain the majority of shares in Gulf Oil, caused Gulf Oil to make the defensive play to move their corporate charter from Pennsylvania to Delaware, where it would be more difficult for Pickens to acquire a position on Gulf’s board of directors where he would be able to influence many policies of Gulf in favor of Boone Pickens. This move caused...