The Chinese National Offshore Oil Company (CNOOC) put in an unsolicited $18.5 billion bid for Unocal, challenging Chevron’s April move to acquire the oil company. Neither is a done deal and this marks China’s continued assertion into corporate hardball.
The deal, if accepted, would give China a much stronger presence in the Asian energy market as the world’s most populous nation continues to develop. With development comes a powerful thirst for energy. Unocal has 27% of oil reserves and 73% of its natural gas reserves in Asia.
CNOOC Ltd., the division CNOOC putting the deal together, offered Unocal $67 a share, a fairly substantial increase over Chevron’s $61.24 back in April. The big difference here besides the obvious price per share is that CNOOC’s offer is all cash. Chevron is cash and stocks. Is $18.5 billion in the hand worth more than $16.4 billion in the bush?
In a letter to Unocal, CNOOC CEO Fu Chengyu said, “This friendly, all-cash proposal is a superior offer for Unocal shareholders. The deal is fully financed, subject to customary closing conditions, and priced in line with market values for comparable businesses. We hope to be able to enter into a dialogue with Unocal soon and reach agreement on a consensual transaction.”
“Fully financed” is the operable term. Morgan Chase, Goldman Sachs, and Rothschild are all helping CNOOC on the deal. This is just one more deal in which China seeks to gain a stronger footing in the multinational corporation business.
Government Watchdogs
This offer has already raised eyebrows in Washington and two California congressmen have called for extremely thorough investigations of the deal. Republican reps Richard Pombo and Duncan Hunter sent a nice little letter to President Bush suggesting just that. Energy Secretary Samuel Bodman said he would encourage the Committee on Foreign Investment look over this deal very carefully.
Many other legislators are likely to watch this very carefully as the U.S. imports over 60% of its oil and also because China has been conduction other corporate mergers and deals for U.S. companies.
Of course this deal still must make it through Unocal’s board and their statement said that while they will evaluate this deal, the recommendation for going with Chevron still stands.
Chevron did say, however, they would get rid of some employees over at Unocal in order to shed unneeded ballast. CNOOC has said they plan to keep just about every body. Unocal currently has around 6600 employees. CNOOC also said in their statement they plan to keep product produced in the U.S. in the U.S.
John Stith is a staff writer for murdok covering technology and business.
