Who will get Unocal? Maybe both Chevron and CNOOC<\/p>\n
Charlie Zhu, Reuters\/Singapore<\/p>\n
As the battle between China's CNOOC Ltd. and Chevron Corp. to buy
\nUnocal drags on, speculation is emerging that they may eventually
\nagree to carve up the U.S. producer.<\/p>\n
By splitting up some of Unocal's assets, such as stakes in its
\nIndonesian natural gas fields, CNOOC and Chevron can avoid a
\nbidding war that could make Unocal too expensive for either of
\nthe bidders, some observers say.<\/p>\n
If Chevron at some stage feels it may be pulled into an
\nexpensive and drawn-out bidding war, it may find merit in the
\nidea of selling CNOOC part of Unocal's Thai natural gas assets or
\nall of Unocal's gas assets in politically-sensitive Myanmar,
\naccording to this line of thinking.<\/p>\n
The Unocal assets in Myanmar, Indonesia and Thailand are
\ncollectively valued by Deutsche Bank at more than US$6 billion.
\nMost analysts see these as the core assets that would be of
\ninterest to CNOOC.<\/p>\n
Separate from the Unocal assets, Chevron could also sell CNOOC
\npart of its stake in the giant Gorgon liquefied natural gas (LNG)
\nproject in Australia for a favorable price, analysts say.<\/p>\n
"When both parties find it is becoming too costly to acquire
\nUnocal, they will probably talk to each other," said Lawrence
\nLau, an analyst at Beijing-backed brokerage BOCI in Hong Kong.<\/p>\n
But analysts stress this is just a possible scenario that
\ncould emerge at the end of a Unocal acquisition saga. If either
\nside pulls ahead as a clear potential victor, a compromise would
\nnot be necessary.<\/p>\n
Currently, neither Chevron nor its Chinese rival is likely to
\ninitiate such ideas, analysts say. If either of the bidders
\nproposed it now, that would weaken their negotiating positions,
\nwhich are at a delicate stage.<\/p>\n
Both Chevron and state-run CNOOC are going all-out to persuade
\nUnocal shareholders to accept their bids.<\/p>\n
"At the moment, they are not going to do anything to change
\nwhat is on the table," said a senior investment banker at a
\nglobal bank in Asia, which is not involved in any discussions
\nabout the Unocal deal.<\/p>\n
CNOOC is scrambling to convince Unocal shareholders that its
\n$18.5 billion, all-cash bid is superior to Chevron's stock-and-
\ncash offer, now valued about 10 percent below CNOOC's, despite
\nthe risks or possible delays associated with obtaining U.S.
\napprovals.<\/p>\n
CNOOC is also seeking to assure Unocal shareholders that a
\nCNOOC-Unocal tie-up eventually will be approved, asserting a deal
\nwould not hurt U.S. energy security because Unocal's assets
\naccount for a tiny fraction of U.S. production.<\/p>\n
Both sides are enlisting political allies. Chevron is whipping
\nup a sense of uncertainty among Unocal shareholders that the
\nCNOOC bid will not pass government reviews, while noting that its
\nown bid, which is supported by Unocal management, has won nearly
\nall necessary approvals.<\/p>\n
For its part, CNOOC has hired lobbyists with political
\nconnections to the Republican-dominated Congress and the White
\nHouse.<\/p>\n
Foreign investment in the U.S. energy sector is not new, but
\nsome U.S. lawmakers object to CNOOC's bid being largely funded by
\nChinese government entities, making it difficult for Chevron to
\ncompete on financing terms.<\/p>\n
CNOOC, which hopes an acquisition of Unocal would help fulfill
\nits ambition to become a regional LNG giant, said on Friday it
\nhad asked for a top-level U.S. government panel to review its
\nmerger proposal with Unocal.<\/p>\n
The clock is ticking. Unocal shareholders are scheduled to
\nvote on Chevron's offer on Aug. 10.<\/p>\n
"The CNOOC bid is not off the table yet. It really comes down
\nhow they manage the politics in the next couple of weeks," said
\nanother banker who is not involved in the process.<\/p>\n
If the political climate turns in favor of CNOOC towards the
\nend of this month, Chevron may have to sweeten its offer,
\nobservers said.<\/p>\n
Another factor that could press Chevron to improve its bid is
\nif Unocal shares continue to trade heavily at the current level
\nof just below $66 each for the next few weeks while Chevron share
\nprices remain largely unchanged, the second banker said.<\/p>\n
That would mean many Unocal shareholders would unlikely accept
\nChevron's present offer, now at just about $60 per Unocal share
\nover CNOOC's offer of $67 a share.<\/p>\n
U.S. securities house Fulcrum Global Partners said in a
\nresearch report on Friday that it still expected Chevron to
\nprevail because "it has politics on its side as a cheap weapon",
\nnoting that Chevron may have to improve its bid.<\/p>\n
It added: "CNOOC could still try to carve out a partnership or
\nasset swap with Unocal or its successor, paying a premium only
\nfor the part the Chinese actually want most. Chevron could still
\nbuy Unocal, CNOOC could still buy what it needs."<\/p>",
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