New York — Wanted: a marriage partner who will follow through on his intentions.
The Cities Service Company, stung by Gulf Oil Corporation's cancellation of its $5.1 billion merger, has hung out such a sign. Cities' management is hopeful the company, with its huge unexplored tracts of land, can attract a new partner. And a lot of Wall Street traders, who had sunk money into Cities Service stock and were expecting to reap the benefits when the merger occurred, are keeping their fingers crossed, too.
Last week, Cities Service stock had dropped from $54 a share Aug. 3 to $37.25 Aug. 6. On Monday, Aug. 9, Cities Service stock opened late for trading. By 2 p.m. on Monday, the stock was expected to open at between $26 and $30 a share, according to the New York Stock Exchange.
On Monday afternoon Cities Service announced it was sueing Gulf Oil in state court in Tulsa, Okla., for $3 billion in damages. The lawsuit described Gulf's termination of its tender offer as ''intentional and malicious breaches of contract . . . of a dimension unprecedented in the annals of American business.''
The price drop threatens to remove $200 million to $400 million from traders' pockets. Only action over the weekend by Cities Service, which offered to buy up to 25 percent of its own stock, has prevented a complete disaster, analysts say.
Still, some traders are calling it the biggest disaster to hit Wall Street in the last 20 years. Several firms specializing in buying the stock of companies involved in takeovers are expected to close their doors unless Cities Service quickly finds a merger partner.
The Gulf Oil announcement on Friday hit the Street hard. The financial hub was already numb from other recent shocks, such as the huge losses stemming from the Drysdale Securities affair and the collapse of the Penn Square Bank in Oklahoma. Unlike its action after these two jarring events, the Federal Reserve Board did not inject reserves into the credit markets Monday. Analysts said the bond markets remained calm despite the losses, which were mainly expected to affect speculators.
According to Larry Wachtel, an analyst at Bache Halsey Stuart Shields Inc., the collapse of the Gulf-Cities Service deal will cause many traders to avoid taking risks.
''Some of the brokerage houses that were willing to venture forth have seen their profits eroded,'' he noted, ''and their ability to support the stock market will be reduced.'' In fact, in the first hour of trading on Wall Street Monday, the Dow Jones industrial average fell 9.32 points, to 775.02. Volume was extremely heavy, with 15 million shares changing hands the first hour.
Gulf said it made its decision to renege on its commitment to buy Cities Service for $63 a share after the Federal Trade Commission raised antitrust objections to the merger, asking Gulf to divest itself of some assets. The FTC had found three areas in which it felt the merger would impede competition: the kerosene-jet fuel markets; a major petroleum pipeline; and gasoline marketing in 10 to 15 large population areas. The FTC asked Gulf to divest itself of a major refinery to resolve some of the problems. But Gulf refused and on Friday said its inability to strike a compromise with the FTC had caused the merger to be scrapped.
But some analysts contended that Gulf, after looking more closely at Cities Service, had decided it was paying too much for the Tulsa-based company. ''The sense on the street is that Gulf had qualms after the deal was done,'' Mr. Wachtel said. He added, ''Gulf's institutional stockholders dumped Gulf's stock after they announced the deal.'' But Gulf's stock rose on Monday, after it had canceled the deal.
Cities Service, which had sought out Gulf as a merger partner to keep Mesa Petroleum from acquiring it for less money, said it was ''astounded'' by the Gulf action. Charles J. Waidelich, the Cities Service chairman, said the company would offer to buy up to 25 percent of its shares on the open market to help stabilize it and prevent chaos on Wall Street and would immediately seek another merger partner. If no merger partner were found, he said, the company would consider liquidating itself - selling off its assets.
But securities analysts were cautious about the company's immediate prospects. William Craig, an analyst with E. F. Hutton, said he didn't think Cities Service would be able to find another suitor that would pay as much as Gulf had offered. As far as liquidating the company, he noted, ''this is not a good time to do that. There are a lot of properties for sale.''
Analysts said the first names that come to mind as potential buyers for Cities Service are the Mobil Corporation and Texaco Inc. Both have expressed an interest in acquiring further oil reserves. ''I have to believe there are buyers ,'' says Rosario S. Ilacqua, an analyst with L. F. Rothschild, Unterberg, Towbin , adding, ''Anything will go at a price. You just wonder what the price is.'' Mr. Ilacqua thinks it's possible that Gulf had second thoughts about the price it was paying, especially since the oil markets have remained weak since it made its original bid in early July.
Still other analysts believe Gulf, in reviewing Cities Service, thought the Tulsa company had problems with some of its contracts. Like other oil companies, for example, Cities Service had sold natural gas to pipeline companies at prices below the current market. These prices can't be raised even after decontrol of natural gas occurs in 1985. Furthermore, as Business Week recently noted, Cities Service has used up a lot of tax deductions on a large part of its oil reserves. Thus the reserves are taxed at the highest tax rate, under the ''windfall-profits tax.''
This week should be a tense one for holders of Cities Service stock. Analysts expect margin calls to force some holders to sell their stock and some arbitrageurs to unload their shares. At the same time, some traders will try to hold on to see at what price Cities buys back its own stock and if it succeeds in attracting another buyer.