CHINESE OIL COMPANY INTERESTED IN UNITED STATES OIL COMPANY

Unocal accepts Chevron, rejects China suitor
20/07/2005 14h12


©AFP/FileLOS ANGELES (AFP) - US oil firm Unocal accepted an improved 17.1-billion-dollar takeover bid from Chevron, snubbing a higher but politically charged bid from China's state-owned CNOOC which insisted it offered a better deal.

Unocal, the ninth-largest US oil company, and Chevron jointly announced the merger, which will be submitted to a vote by Unocal shareholders on August 10.

China National Offshore Oil Corp. (CNOOC) had offered 18.5 billion dollars but the bid had set off a controversy in the United States about a major US firm falling into Chinese hands. Some US lawmakers sought to have it blocked because of security concerns.

Unocal had already agreed a merger with Chevron in April when it received the rival CNOOC bid.

The new Chevron bid values Unocal at 63.01 dollars per share based on its closing price Tuesday. Chevron's previous offer was for 60.51 dollars in cash and stock.

"Our increased offer has been driven by competitive circumstances, but even at this higher price it remains a compelling transaction for Chevron stockholders," Chevron chairman and chief executive David O'Reilly said in a statement.

CNOOC's cash offer was higher. "Our reaction is that we still have the superior offer and it is superior because we are making an all cash offer at 67 dollars a share," Ray Bashford from Brunswick Group, CNOOC's media relations firm, told AFP in Hong Kong, indicating that the Chinese firm was ready to continue negotiations.

A CNOOC spokesman echoed similar sentiments. "We think that our full-cash offer is still superior even after Chevron raised its bid," he was quoted as saying by Xinhua, China's official news agency.

Members of the US House of Representatives' Armed Services Committee had said an acquisition by CNOOC would give Beijing access to a strategically vital asset and should be blocked.

The US lawmakers' move drew an outcry from the Chinese government, which condemned the lawmakers' initiative as political interference in what it insisted was a strictly business deal.

Unocal and Chevron issued a joint statement Wednesday saying a new merger had been agreed.

"The Unocal board of directors recommends that Unocal stockholders vote in favor of adopting the Chevron merger agreement, as amended, at the special meeting of stockholders scheduled for August 10, 2005," Unocal said in the joint statement.

Chevron's revised offer consists of 40 percent cash and 60 percent stock, with the company paying about 7.5 billion dollars in cash and issuing about 168 million shares.

It gives Unocal shareholders three options for each share held: to receive 69 dollars in cash; 1.03 shares of Chevron common stock; or a combination of 27.60 dollars in cash and 0.618 of a share of Chevron common stock.

Unocal, based in El Segundo near Los Angeles, is one of the world's leading independent energy companies, specialized in the exploration and production of oil and natural gas, but it lacks refining operations and a distribution network.

Unocal employs about 6,000 people worldwide, mainly in North America and Asia. Most of its oil and gas assets are in Asia, notably in Thailand, Indonesia and central Asia.

The company posted 2004 net profit of 1.2 billion dollars on sales of eight billion.

Its bigger, friendly suitor Chevron reported net profit of 13.3 billion dollars for the same year on sales of 155.3 billion.

Analysts have pointed out that politics may not be uppermost in Unocal shareholders' minds when they vote August 10 on whether to accept the 18.5-billion-dollar cash bid from CNOOC, or the stock-and-cash offer from Chevron that is worth about 1.4 billion dollars less.

An oil analyst with Oppenheimer and Co., Fadel Gheit, said earlier this month that it was unlikely that CNOOC's offer would be rejected out of hand.

Institutional investors holding Unocal stock "aren't going to give up nine percent or 10 percent to be more patriotic", Gheit said.

China is now the world's third largest importer of oil and CNOOC needs assets to feed its terminals. Analysts have said that CNOOC may now look to other targets in Asia to secure gas supplies for its terminals.

They have suggested other potential acquisitions could include stakes in Woodside Petroleum or Santos of Australia or even whole companies such as BG Group or US-based Marathon.

I certainly don't claim to be an expert on US business law*. However, didn't the govt of the day deliberately *break up* the predecessor of Uncol/Exxon/Chevron to STOP them from dominating the market?