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CNOOC withdraws its bid for
Unocal
BEIJING - China
National Offshore Oil Company Ltd (CNOOC)
announced on August 2 that it had formally
withdrawn its acquisition offer for
California-based Unocal, putting an end to its
40-day merger bid for the US company, which
triggered an unexpected political storm in the US.
CNOOC said in an announcement
that it had considered further improving the terms
of its offer, and would have done so but for the
political environment in the US. "The
unprecedented political opposition that followed
the announcement of our proposed
CNOOC Limited official
withdrawal
announcement
August 2,
2005
We believe that the
combination of CNOOC and Unocal would have
created a strong and successful oil and gas
company, focused on the fast growing Asian
economy, to the benefit of our shareholders and
the employees of both companies. We entered into
the bidding process for Unocal in good faith,
following procedures set out by Unocal.
CNOOC's fully financed offer to acquire
all of Unocal's outstanding shares for cash at a
price of US$18.5 billion represents a premium of
approximately $1 billion above Chevron's current
competing bid and clearly [constitutes] superior
value for Unocal shareholders. We proposed and
agreed to a variety of measures to provide
further comfort to Unocal's shareholders. In
addition, recognizing that the transaction would
be reviewed by CFIUS, pursuant to the United
States Exon-Florio Act, CNOOC initiated a
voluntary filing with CFIUS, and proactively
committed to take actions with respect to
Unocal's US assets as necessary to satisfy CFIUS
findings.
CNOOC has given active
consideration to further improving the terms of
its offer, and would have done so but for the
political environment in the US. The
unprecedented political opposition that followed
the announcement of our proposed transaction,
attempting to replace or amend the CFIUS process
that has been successfully in operation for
decades, was regrettable and unjustified. This
is especially the case in light of CNOOC's
purely commercial objectives and the extensive
commitments that CNOOC was prepared to make to
address any legitimate concerns US regulators
may have had regarding our acquisition. This
political environment has made it very difficult
for us to accurately assess our chance of
success, creating a level of uncertainty that
presents an unacceptable risk to our ability to
secure this transaction. Accordingly we are
reluctantly abandoning our higher offer to the
clear disadvantage of Unocal shareholders and
employees.
We deeply appreciate the
support we have had from shareholders in recent
weeks, but feel it is no longer in their
fundamental best interests that we pursue our
bid in these circumstances. We maintain a
disciplined and focused approach to our
evaluation of opportunities to grow shareholder
value and will continue to work closely with
companies and countries around the world. To
this end, we look forward to continuing our
strategy and business plan and to growing our
business for our shareholders.
(Source:
CNOOC company
website) |
transaction ... was
regrettable and unjustified," said the company. A
CNOOC spokesman in Beijing told Xinhua on August 2
that "political pressure" was one of the major
reasons the company withdrew its offer.
CNOOC Ltd, a subsidiary company of the
state-owned China National Offshore Oil
Corporation, announced on June 23 an all-cash bid
for Unocal Oil Company at US$67 per share,
totaling US$18.5 billion. The bid, however, met
with political opposition from the US Congress,
where some viewed the proposed merger as a threat
to American security.
In fact, this
development was not totally unexpected. When the
CNOOC offer was announced, some Chinese economists
had expressed their worry that the deal might be
blocked for political reasons. Long Guoqiang, an
expert with the Development and Research Center of
the State Council, China's cabinet, said at the
time: "There are two factors affecting the results
of negotiations. The first is the market, which is
favorable for CNOOC because of the higher price it
has offered. However, the other factor, or the
policy factor, may become the biggest obstacle for
the CNOOC bid."
In early July, the US
House of Representatives voted 398-15 for a
measure calling on President George W Bush to
review the CNOOC bid, citing security threats,
including the possible transfer of military
technology to China. Then, Unocal's board of
directors announced in late July that it had
chosen to accept the sweetened bid of Chevron,
CNOOC's major rival in the competition to buy
Unocal, and would recommend the merger with
Chevron at the special meeting of Unocal
shareholders scheduled for August 10.
The
sweetened Chevron bid, a mixture of cash and
Chevron shares, stands at a little over US$17
billion and is still lower than CNOOC's final bid.
According to Unocal, because any purchase by CNOOC
would have to be examined by the Bush
administration, a process that could have taken
months, Unocal insisted CNOOC raise its offer to
compensate for the risk of delays while the
companies sought regulatory approval for the
merger. But CNOOC refused to put forward a new
offer, saying that it wouldn't do so unless Unocal
agreed to pay the costs of ending the Chevron
deal, and lobby on CNOOC's behalf in the US
Congress.
The unfortunate timing of the
bid also worsened the political environment for
CNOOC in the US, said Mei Xinyu, a researcher with
the Chinese Ministry of Commerce. "As a strategic
energy resource, petroleum has seen its price
rocketing in the international market since last
summer. As a result, to take over a foreign oil
company at such a time will not only increase the
takeover cost, but also heighten the worries of
the country where the [desired] company is
located," Mei said. "Anyway, [the Unocal takeover
attempt] was still a good experience for Chinese
companies, many of which are adopting a so-called
'going-out' strategy and seeking global
expansion," Mei added.
(Asia
Pulse/XIC) |
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