The Chinese National Offshore Oil Company told the Financial Times they might just up the ante up and over their $18.5 billion bid for California based Unocal. The bid, China hoped would be just another business deal but as this saga continues, its international proportions continue to grow.
Unocal, best known for its bright orange and blue 76 logo continues to be steeped in controversy. Chevron back in April offered Unocal $16 billion in cash and stocks in what was a basic, huge merger. Chevron said they lay off most of Unocal’s employees and keep the assets.
CNOOC upped the ante when they offered $18.5 billion in cash and have said they’re considering going higher. They intend on making Chevron work for this one. China was primarily after the assets Unocal has in the Asian markets, which include about 75% of their natural gas sources. China is having a major power crunch.
Some feel this is more than just a grab for their own sources of energy. Congress has been hollering for blood in this business deal and want it thoroughly examined. The Bush administration has remained suspiciously quiet on the matter and they even managed to nix Senator Schumer’s efforts regarding Chinese business deals.
Senator’s Kent Conrad, D-ND, and Jim Bunning, R-KY called Commerce Secretary Carlos Gutierrez to look into the CNOOC deal further and find out if the state-owned Chinese oil company was violating pledges it signed upon joining the World Trade Organization. According the letter the senators sent to Guitierrez, they accuse China doctoring the deal so CNOOC receives $7 billion at below-market interest rates to finance the deal.
This would violate their pledge to the WTO for fair market practices that require state owned banks to lend at commercial rates to state owned companies. The company also plans to borrow $6 billion from Industrial & Commercial Bank of China, another state owned institution and $3 billion from Goldman Sachs and Morgan Chase.
Right now, Unocal has advised its stockholders to go for the Chevron deal. They are considering the CNOOC offer at this time but politically, CNOOC will be a difficult deal to do. It would be very unpopular with politicians and citizens alike. The other thing is some critics see this as an honest attempt to undermine capitalism and their support comes from the fact that China is currently buying or in the works of buying a number of U.S. companies, sending many of American jobs to China while they keep their yuan pegged well below the U.S. dollar.
John Stith is a staff writer for Murdok covering technology and business.
