CNOOC offers $18.5b for Unocal, races with Chevron

CNOOC offers $18.5b for Unocal, races with Chevron

Joe McDonald, Associated Press, Beijing

State-owned CNOOC Ltd., China's third-biggest oil producer,
made a US$18.5 billion bid on Thursday for U.S. oil company
Unocal Corp., setting up a possible contest with rival bidder
Chevron Corp.

The CNOOC bid was the biggest yet in a multibillion-dollar
wave of foreign takeover attempts by Chinese companies trying to
secure a place in the top ranks of global competitors.

Unocal already had agreed to be acquired by Chevron for a
lower price of $16.6 billion, but said it would evaluate the
CNOOC offer. Unocal said its board's earlier recommendation to
shareholders to accept the Chevron offer remained in place.

Chevron offered in April to acquire Unocal in a deal that
offered Unocal shareholders a choice of accepting $65 per share
cash, 1.03 shares of Chevron stock or a combination of stock and
cash.

CNOOC chairman and CEO, Fu Chengyu, called his company's bid
friendly and said it would be superior for Unocal shareholders.

"The deal is fully financed, subject to customary closing
conditions, and priced in line with market values for comparable
businesses," Fu said in a written statement. "We hope to be able
to enter into a dialogue with Unocal soon and reach agreement on
a consensual transaction."

CNOOC joins a series of top state-owned Chinese companies that
have made high-profile acquisition attempts abroad in recent
years in an effort to establish a global presence.

Its bid came as U.S. appliance maker Maytag said it was
considering a $1.28 billion buyout offer from China's Haier Group
and two U.S. private equity firms.

Chinese computer maker Lenovo Group Ltd. earlier bought IBM
Corp.'s PC business for $1.75 billion.

CNOOC said its deal with Unocal would more than double its
production and increase reserves by nearly 80 percent.

The company also noted that both it and Unocal have a
significant presence in Asia. CNOOC estimated that 85 percent of
the combined reserves of both companies are located in Asia and
the Caspian Sea region.

The company argued that the combination would result in a more
balanced portfolio between natural gas and oil reserves,
resulting in protection from price volatility in both
commodities.

Chevron, based in San Ramon, California, reaffirmed its bid,
saying its offer "combines compelling value, regulatory certainty
and accelerated timing, providing a superior transaction for
Unocal stockholders."

Chevron also noted that the merger agreement has been approved
by the boards of both companies and has received regulatory
approval.

The Federal Trade Commission approved the Chevron-Unocal deal
in June after Chevron promised not to enforce a patent on
reformulated gasoline that the FTC said could have increased gas
prices in California by more than $500 million, or almost six
U.S. cents a gallon.

The approval settled a two-year-old legal fight between Unocal
and the FTC.

Chevron noted that a deal with CNOOC would require extensive
new regulatory approvals in the United States and elsewhere.

CNOOC's chief financial officer, Yang Hua, told Dow Jones
Newswires that his company is "prepared to closely cooperate ...
to get U.S. approval for this deal."

CNOOC said it plans to retain "substantially all employees,
including those in the U.S," noting that Chevron, in contrast,
plans layoffs.

"We believe the offer will be very good for America as we are
going to protect U.S. jobs while continuously marketing
(Unocal's) products in the U.S.," Yang said.

Chevron said it expected Unocal shareholders to vote on its
offer sometime in August.

The CNOOC purchase, if it is completed, would be China's
largest overseas acquisition ever.

Shares of Unocal rose nearly 2 percent Tuesday on rumors that
CNOOC was considering a bid. The stock rose 1 cent to close at
$64.86 Wednesday on the New York Stock Exchange, then rose 39
U.S. cents in after hours trading.