News and Document archive source
copyrighted material disclaimer at bottom of page

NewsMinewar-on-terrorchina — Viewing Item


China unocal deal curbed by chevron { July 20 2005 }

Original Source Link: (May no longer be active)
   http://www.washingtonpost.com/wp-dyn/content/article/2005/07/20/AR2005072000164_pf.html

http://www.washingtonpost.com/wp-dyn/content/article/2005/07/20/AR2005072000164_pf.html

Unocal backs sweetened $17 bln Chevron bid

By Jessica Hall and Charlie Zhu
Reuters
Wednesday, July 20, 2005; 10:15 AM

PHILADELPHIA/SINGAPORE (Reuters) - U.S. oil producer Unocal Corp. endorsed a sweetened $17 billion takeover offer from Chevron Corp., preferring it to a higher bid from China's state-run CNOOC Ltd. <0883.HK>.

Chevron , the second-largest U.S. oil company, raised its stock and cash bid to $63.01 per share from roughly $60, turning up the heat in an international battle for energy assets as strong demand and tight supply hold crude oil prices near record levels.

The improved offer for Unocal, which has assets stretching from Myanmar to the Gulf of Mexico, sets the stage for CNOOC to raise its $67 a share cash bid further.

"We're likely to see CNOOC increase its bid, which it has been signaling for a while," said Duane Grubert, an analyst with Fulcrum Global Partners.

A CNOOC spokesman said the company remained "comfortable" with its $18.5 billion bid and believed its offer had a "distinct advantage." A person familiar with the matter said CNOOC had anticipated a higher Chevron bid and was reviewing options on how to react.

But Chevron still remains the favorite to win Unocal, whose board has favored Chevron's bid partly due to concern U.S. regulators might reject the CNOOC deal based on national security grounds or the deal may be stuck in long review process. It recommended shareholders accept the sweetened offer at a shareholders' meeting already scheduled for Aug. 10.

"We're still making the bet that Chevron will prevail," Grubert said. "The politics against the Chinese bid are so severe."

CNOOC will try to convince shareholders that its deal would be approved by the U.S. government, the source familiar with the matter said.

"Price is only one issue on shareholders' minds. The other issue is to make people understand the 'certainty issue'," said the source, who spoke on condition of anonymity. "CNOOC is absolutely committed to the transaction and determined to win."

CNOOC has made some concessions in an attempt to woo Unocal. It agreed to set aside $2.5 billion in a U.S. escrow account that could be tapped by Unocal shareholders if CNOOC walked away from a deal. CNOOC also put $500 million in escrow to pay a break-up fee attached to the Chevron-Unocal deal.


STILL SUPERIOR

Peter Schoenfeld, chief executive officer of New York-based investment firm PSAM LLC, which holds more than 1 million Unocal shares, said CNOOC's bid remained superior provided it could be approved by the U.S. government within 90 days.

But "realistically, the Unocal Board will likely still require an improvement above $67 by CNOOC to switch allegiance," he said. He believes Unocal could be worth $74 per share based on recent transactions.

Yang Liu, a fund manager at Atlantis Investment, which does not hold CNOOC shares, said CNOOC should not rush to raise its bid. "CNOOC should cool down a bit. They should wait for Unocal shareholders to vote on the Chevron deal," Liu said.

Chevron, which has a stock market value of about $120 billion, raised the cash component of its offer to 40 percent from 25 percent, offering a total $7.5 billion in cash plus 168 million new shares, equivalent to about 7.5 percent of its enlarged share capital according to Reuters data.

Unocal's timely sale of Canadian assets to Pogo Producing Co. for a higher-than-expected $1.8 billion has helped Chevron comfortably raise its bid without straining itself financially, Grubert said.

Unocal shareholders will get $27.60 in cash and 0.618 of a Chevron share for each Unocal share. Shareholders will have a choice of taking shares or cash. But if election for all cash or all shares exceeds the 60:40 split, they will get shares and cash on a pro-rata basis.

Chevron said the higher offer remained accretive to earnings per share in 2006.

Unocal shares rose 22 cents to $65.21 in morning New York Stock Exchange trading, a 3.4 percent premium over Chevron's offer price, but down 2.4 percent from a record high $66.78 a week ago.

Chevron's bid values Unocal at 11 times analysts' forecasts for Unocal's 2005 earnings, according to Reuters data. Chevron shares trade at a 2005 price/earnings ratio of 9.4 times.


CONCERNS

CNOOC's shares initially rose 2.2 percent to HK$4.75 in Hong Kong trading on Wednesday, but pared gains to close at HK$4.675 after the news, up just 0.5 percent.

CNOOC shareholders are concerned a rise in the Chinese bid could undermine the interests of CNOOC's minority shareholders. At least one fund has sold its stake as a result.

"We expect CNOOC is now pondering whether it will raise the bid or not. It's a matter of whether it will justify shareholders' value," said fund manager Stella Mak at East Asia Asset Management Co., which holds CNOOC shares.

CNOOC's overture had sparked concern among U.S. politicians that a sale of Unocal to a Beijing-controlled company would harm U.S. national energy security. Beijing owns 70 percent of CNOOC. Its deal is backed by low- and zero-interest state loans.

(Additional reporting by Deepa Babington in New York and Wendy Lim in Hong Kong)

2005 Reuters



Afghan china { January 24 2002 }
America helped restrict freedoms in china
Beijing crushes a student group
Beijing world threat
Bush says the spirit of the lord is strong in china
Bush taiwan
Carlyle group financially invades asia { February 14 2005 }
China and india cooperate on securing oil { January 12 2006 }
China assembles missiles facing taiwan
China boosts military spending
China buildup against us { May 16 2003 }
China cities scramble to manage mass migration { April 28 2006 }
China coul rule clothes market after 2005 { August 12 2004 }
China creating unprecedented pollution { August 25 2007 }
China criticizes US human rights
China detains 3 who criticized government { December 14 2004 }
China exports hurt by tainted products { June 28 2007 }
China has billionaire boom { September 2007 }
China land grab causes popular unrest { October 5 2004 }
China launches manned space mission { October 14 2003 }
China legislates force if taiwan declares independence
China military seeks comfort from high technology { August 1 2004 }
China orders probe on forced slave labor { May 2007 }
China prepared to use nukes if attacked over taiwan { July 14 2005 }
China president meets iran leader
China protests japan bid for security council status
China ramps up warnings to us about honk kong
China sets up riot police units { August 18 2005 }
China sets up squads to combat anti terrorism { August 18 2005 }
China stern warning { August 5 2002 }
China taiwan
China tests balliestic missile submarine
China threatens military force on taiwan { March 8 2005 }
China tightens political freedoms { April 24 2005 }
China to accept foreign private equity buyouts { June 6 2007 }
China to buy Kazakhstan oil { August 22 2005 }
China to privitize collectively owned land { March 8 2007 }
China trade surplus hits 80 billion in 2005
China unable to quench thirst for oil { January 20 2004 }
China unocal deal curbed by chevron { July 20 2005 }
China US rift after bush meets dalai lama { September 2007 }
China warns of military clash with taiwan { July 30 2004 }
China warship { March 26 2002 }
China wtc { September 11 2001 }
Chinese crackdown on tibet protests { February 2008 }
Chinese demand better english for olympics { April 11 2007 }
Chinese leader solidifies power { June 28 2003 }
Chinese police fire into village protest { December 9 2005 }
Chinese premier defends 1989 Tiananmen Square massacre { March 14 2004 }
CIA issues warning on china military effort { February 16 2005 }
Defense minister warned crush taiwan independence army day
Ehtnic clashes eupt in china 150 dead { October 31 2004 }
EU considering dropping arms ban { December 8 2004 }
EU to challenge US on china
General motors invests 3b in china { June 7 2004 }
Hong kong from british rule
Honk kong protests anti subversion law { July 1 2003 }
Honk kong residents spied for mi6
Honk kong stages massive march
Houses of china poor demolished by government { March 9 2006 }
Hu warns us { May 2 2002 }
Income gap widens in china
Iran urges china intervene palestinians
Japan prepares for china attack { November 8 2004 }
Joint china russia war games seen as message { August 17 2005 }
Millions join anti china protest in taiwan
Mugabe envisages world order header by china { December 3 2003 }
Oil and mercantilism for china { April 19 2006 }
Pentagon report concerned over china military rise { July 20 2005 }
Police raid china newspaper that reported sars { January 8 2004 }
Rupert murdoch business success in china { June 26 2007 }
Rural chinese leave home in search of better life { May 17 2006 }
Senior chinese ready for necessary casualties over taiwan
South industrial china town explodes with violence { January 17 2006 }
Starbucks wins china trademark lawsuit { January 2 2006 }
Taiwan china begin historic direct commercial flights
Taiwan president shot wounded before elections
Taiwan protesters riot police clash
Taiwan referendum could lead to war { December 3 2003 }
Taiwan says vote despite bush warning
Taiwan warned by us not to provoke china { December 9 2003 }
Thousands join anti japan protests in east china
Twice missile range { November 20 2002 }
Us penalizes iran missile aid { May 23 2003 }
US plans huge show of force in Pacific { June 30 2004 }

Files Listed: 85



Correction/submissions

CIA FOIA Archive

National Security
Archives
Support one-state solution for Israel and Palestine Tea Party bumper stickers JFK for Dummies, The Assassination made simple