Unocal takes Chevron bid, snubs China's CNOOC

Unocal takes Chevron bid, snubs China's CNOOC

Agence France-Presse, Los Angeles/Beijing

U.S. oil firm Unocal said on Wednesday it had accepted an improved takeover bid by Chevron of US$17.1 billion, snubbing a higher but politically controversial bid from China's state-owned CNOOC.

Unocal, the ninth-largest U.S. oil company, and Chevron jointly announced the merger agreement, which will be submitted to a vote by Unocal shareholders on Aug. 10.

Unocal had already agreed a merger with Chevron in April when it received a rival bid in June of $18.5 billion in cash by China National Offshore Oil Corp. (CNOOC), the country's third-largest oil group.

But the Chinese bid touched off a firestorm of controversy among some U.S. lawmakers and the American public, and prompted calls for Congress to intervene to block the move.

The sweetened bid by Chevron represents an overall value of $63.01 per share of Unocal common stock based on the closing price of Chevron stock on Tuesday.

Chevron's previous offer was for $60.51 in cash and stock.

By contrast, CNOOC's cash offer amounted to $69 a share.

Members of the House of Representatives' Armed Services Committee had said an acquisition by CNOOC would give Beijing access to a strategically vital asset and should be blocked.

The U.S. lawmakers' move drew an outcry from the Chinese government, which condemned the lawmakers' initiative as political interference in what it insisted was a strictly business deal.

"The Unocal board of directors recommends that Unocal stockholders vote in favor of adopting the Chevron merger agreement, as amended, at the special meeting of stockholders scheduled for Aug. 10, 2005," Unocal said in the companies' joint statement.

Chevron's revised offer consists of 40 percent cash and 60 percent stock, with the company paying about $7.5 billion in cash and issuing about 168 million shares.

It gives Unocal shareholders three options for each share held: to receive $69 in cash; 1.03 shares of Chevron common stock; or a combination of $27.60 in cash and 0.618 of a share of Chevron common stock.

CNOOC insisted that its bid for Unocal was the best on the table after the U.S. oil major snubbed it in favor of U.S. peer Chevron.

"We think that our full-cash offer is still superior even after Chevron raised its bid," a spokesman for the company said in Beijing.

The official said he only learnt of Unocal accepting an improved takeover bid by Chevron of $17.1 billion via the Internet.

The spokesman, quoted by Xinhua news agency, said the Chinese company was expected to give an official response soon.

Dealers in Hong Kong, where CNOOC is listed, said that despite the seeming setback, its stock prospects will actually improve if it withdraws from the Unocal bid.

"CNOOC's failure to take over Unocal will be a big positive for investors," said Ken Li, an analyst at China Everbright Securities.

Unocal, based in the Los Angeles suburb of El Segundo, is one of the world's leading independent energy companies, specialized in the exploration and production of oil and natural gas, but it lacks refining operations and a distribution network.

Unocal employs about 6,000 people worldwide, mainly in North America and Asia. Most of its oil and gas assets are in Asia, notably in Thailand, Indonesia and central Asia.

The company posted 2004 net profit of $1.2 billion on sales of eight billion.

Its bigger, friendly suitor Chevron reported net profit of $13.3 billion for the same year on sales of 155.3 billion.