Which company acquired Cities Service in 1982, yielding a $30 million profit for Mesa Petroleum?

Which company acquired Cities Service in 1982, yielding a $30 million profit for Mesa Petroleum?

• A. Exxon
• B. Occidental
• C. Chevron
• D. BP

Answer: (B)

Understanding how a takeover can unlock profits for investors in the oil industry helps explain this question. Occidental Petroleum acquired Cities Service in 1982. Mesa Petroleum, which owned a large stake in Cities Service, benefited when the deal closed, realizing about a $30 million profit as a result of the acquisition. This is a classic example of how strategic buyers paying a premium in a merger can translate into meaningful gains for major shareholders in the target company. The other oil majors listed did not acquire Cities Service in that period, so they aren’t associated with this profit.

Understanding how a takeover can unlock profits for investors in the oil industry helps explain this question. Occidental Petroleum acquired Cities Service in 1982. Mesa Petroleum, which owned a large stake in Cities Service, benefited when the deal closed, realizing about a $30 million profit as a result of the acquisition. This is a classic example of how strategic buyers paying a premium in a merger can translate into meaningful gains for major shareholders in the target company. The other oil majors listed did not acquire Cities Service in that period, so they aren’t associated with this profit.