Unocal may back bid by China's CNOOC if it meets conditions - report [Chi-Com State Owned Business]

Interactive Investor ^ | July 7, 2005 | Unknown

[conservativecorner]

BEIJING (AFX) - Unocal Corp has told CNOOC Ltd it will consider withdrawing its backing for a 16.5 bln usd bid by Chevron Corp in favour of the Chinese company's 18.5 bln usd offer if it pledged to meet a number of conditions, the Financial Times reported.

The newspaper, citing people close to the situation, said the conditions include requests for divestments and other demands from US regulators.

The paper said CNOOC and Unocal have been in negotiations over the state- controlled group's landmark bid for the last 10 days.

The US oil and gas group has set out what it would take for the Chinese offer to be declared "superior" to Chevron's.

Negotiations have also focused on specific pledges CNOOC might be prepared to make to defuse US regulators' concerns, the paper said.

The CNOOC bid, launched last month, was pitched at a premium to Chevron's offer partly because of fears Washington could block the Chinese group's takeover.

With the price of CNOOC's bid so far fixed at 67 usd a share, the talks have turned to other details in the merger agreement, such as a "material adverse change" clause as well as the treatment of Unocal management, employees and the pension plan.

People close to the situation warned that CNOOC had not taken a final decision on whether to comply with Unocal's requests.

The paper said Yang Hua, CNOOC's chief financial officer, returned to Beijing this week to report to senior executives, led by Fu Chengyu, chairman and chief executive, on the talks.

But the paper said insiders appeared confident.

"These issues could be wrapped up by next week, and if CNOOC complies, a decision could come within a couple of weeks," said a person close to the situation.

The paper said that winning the backing of Unocal's board, which could make a decision next week, is crucial if CNOOC is to persuade the US company's shareholders to reject Chevron's cash-and-shares offer in a vote scheduled for Aug 10.

Failure to get the board's support would force CNOOC to choose between walking away and raising the bid, it said.

(1 usd = 8.3 yuan)

[conservativecorner]

The paper said CNOOC and Unocal have been in negotiations over the state- controlled group's landmark bid for the last 10 days.

There is no way in Hell that they should get Unocal Corp.

[Oldexpat]

It sounds like CNOOC is buying off the US Execs at Unocal with big golden paras..
There is no way that we should allow a State Owned Oil company to buy out our oil companies. This is idiocy.
If GOP goes along with it..

[TheBattman]

I don't care what sort of "deal" is brokered between the Chi-Coms and Unocal. No way in hell should we allow the Chineese to control a US oil company. There are so many obvious reasons -

#1 - The Chineese want it to bolster their own oil supplies - thus the obvious reduction in our own.

#2 - This would give the Chineese more leverage over our economy.

#3 - It's just plain WRONG!

[IllumiNaughtyByNature]

#2 - This would give the Chineese more leverage over our economy. Chinese factories currently have no power 2 days a week, rolling blackouts because lack of power availabiity. Imagine if they could run all plants 7 days a week and have control over our largest oil company.

[Realism]

Money talks, and China has lots more to spend. 18.5 bln is a drop in the bucket.

[conservativecorner]

Money shouldn't be the determining factor here, and national security should be.

[Enterprise]

If the commies get UNOCAL, do they also get access to all the credit card information of the customers?

[beelzepug]

Does anyone else see the irony of communists owning the company that used to bill itself as "The Spirit of '76"?

[Realism]

I agree, but the reality of the situation is the desperate need for corporate and shareholder profits.
As Capitalists and Free Traders we must always be willing to sell our global competitors and adversaries the rope from which they will attempt to hang us. If we don't we'll be labeled protectionists, isolationists, and hypocrites.
Personally I love to see China nationalize all of it, and burn their greedy buts big time.

[kaktuskid]

If the commies get UNOCAL, do they also get access to all the credit card information of the customers?

The 76 gas stations and refineries have NOT been owned by UNOCAL for over a decade...they are now owned by Conoco/Phillips

[Uncle Hal]

Yesterday the WSJ had a very interesting article discussing this proposed merger. We are about $775 Billion in debt to the Chinese and it is increasing about $20 Billion a month or about the same as the proposed purchase price for UNOCAL. From a dollars and cents stand point this merger is small change. The Chinese hold a lot of dollars and they could cause a lot of trouble it they wanted to by pulling money out of our economy and switching to other investments in other countries. This is the price we are paying for the horrendous trade deficit we have with the Chinese. This is similar to the situation with Japan in the 1970's and 80's. The article indicated there is trouble down the road if this imbalance keeps up. This economic perspective is different than the security standpoint that every one is talking about.

[Mind-numbed Robot]

Unocal Corp has told CNOOC Ltd it will consider withdrawing its backing for a 16.5 bln usd bid by Chevron Corp in favour of the Chinese company's 18.5 bln usd offer if it pledged to meet a number of conditions, the Financial Times reported.

What is a pledge from Chania worth? If they go back on their word what are we going to do, attack them?

[Mind-numbed Robot]

This is similar to the situation with Japan in the 1970's and 80's.

And how did that turn out?

The article indicated there is trouble down the road if this imbalance keeps up.

How is it to China's advantage to destroy the economy of its biggest customer? Why would they exchange the most secure debt instruments in the world for something else? How is it to their advantage to depreciate the assets they hold?

This economic perspective is different than the security standpoint that every one is talking about.

Yes, it is economic MAD rather than military MAD. As such, the Chinese have no advantage.

[Enterprise]

Ok - thank you.

[seastay]

"other details in the merger agreement, such as a "material adverse change" clause as well as the treatment of Unocal management, employees and the
pension plan"

In other words a bribe to management executives so they will yield control of capitalists owned entry to a communist government, which earned it's bribe money on the backs of human slavery , shame full...

[curiosity]

Personally I love to see China nationalize all of it, and burn their greedy buts big time.

That $18.5 billion valuation looks pretty high to me. Problem is, if they get burned on this deal, good people assocaited with the company are likely to get burned too.

Given the tendency for even well-run, investor-owned acquirers to overpay, I would find it highly surprising if a state-run entity did not overpay as even more.

[curiosity]

How is it to China's advantage to destroy the economy of its biggest customer? Why would they exchange the most secure debt instruments in the world for something else? How is it to their advantage to depreciate the assets they hold?

There's the rub. China is not a corporation. It's government's goals are not to create shareholder value. Hence we cannot expect them to act in that manner.

[Mind-numbed Robot]

The oligarchs are human and greedy despite the Party rhetoric. That is the seductive aspect of free enterprise in a Communist system and why they eventually must get freer or chuck it all and go back to tyranny. If they do that the economy will tank.

It is well established that they have a plan for global conquest, or at least to control the eastern hemishere, and they are still proceeding along that line. However, even after their military catches up, if ever, we will still be where we are. Militarily nuclear war is suicidal and we are still the most advanced in traditional weapons. Economically, if they try to bankrupt us by calling in the debt, or cashing their U.S. government bonds in mass, we can simple refuse to cooperate and not redeem them enmass. Would that harm us with other economies? I doubt it because they have just as much stake in the U.S. economy as China, Japan, .......

Our biggest threat is the domestic left, the Democrats and their supporters, legal and illegal, openly and clandestinely. Our economy would dominate more than it does and China would not be of concern were it not for the multiple ways they handicap us. We need to take back America while fighting off the terrorist/communists front internationally.

[curiosity]

The oligarchs are human and greedy despite the Party rhetoric. That is the seductive aspect of free enterprise in a Communist system and why they eventually must get freer or chuck it all and go back to tyranny.

I disaggree. If they do not liberalize, they will get plutocratic crony capitalism.

While a horrible system, it keeps the plutocrats rich and the rest of the masses well off enough so that they don't feel compelled to agitate. It is the most likely outcome.

[Mind-numbed Robot]

OK. Sounds reasonable to me. However, we know nothing stays the same so there will be change. The free get less so, and the less so get more so.