As China’s Cnooc ups the price to $18.5 billion USD, Chevron will likely have to respond with a higher bid.
While the tug of war between Cnooc and Chevron outwardly looks like a typical takeover battle, it does differ in one way. This would be the biggest attempt by a Chinese company to takeover an American corporation, according to the Wall Street Journal.
Unocal had agreed to accept Chevron’s bid of $16.4 billion. But the new bid from Cnooc likely will push Chevron to sweeten its deal considerably. And then get a new bid from Cnooc. Some investors believe Unocal should be worth around $70 per share, well above the $64.86 close price yesterday.
Unlike Washington policymakers, China has no issues with various regimes that the White House would prefer not to deal with in business. As its nation’s demand for oil products increases, China expands upon its foreign policy and sends its diplomats to Iran, Venezuela, and Sudan to broker oil deals.
A Cnooc bid would be reviewed by the interagency panel Committee for Foreign Investment in the U.S. For its impact on national security. And two House Republicans from Unocal’s home state of California have already asked the White House to review and possibly block the Cnooc bid.
Cnooc sees itself in a benign role as it tries to acquire Unocal. Its Chairman and CEO, Fu Chengyu, says his company plans to keep most of the 6,000 US-based workers, and to resell the oil and gas it produces in the US within America.
Nearly half of Unocal’s reserves consist of natural gas in Asia. A Cnooc-Unocal combination would have about 85 percent of its reserves there.
Cnooc sees its all-cash proposal as superior to Chevron’s combined cash and stock offer. “Our all-cash offer is clearly superior for Unocal shareholders,” Mr. Fu said in an interview. “Second, it is good for America. We will protect Unocal’s U.S. jobs.”
David Utter is a staff writer for Murdok covering technology and business. Email him here.
