Posted on 07/14/2005 5:01:41 PM PDT by Brilliant
NEW YORK (Reuters) - A crucial Unocal Corp. board meeting on Thursday to discuss competing bids from Chevron Corp. (NYSE:CVX - News) and a Chinese oil company ended without any public statement on the outcome, as expectations of a bidding war between the two suitors grew.
Unocal -- which has so far backed Chevron's offer despite a higher bid from China's CNOOC Ltd.-- declined to provide any details on the meeting at the company's El Segundo, California, headquarters.
A Unocal spokesman said it would violate securities law if he disclosed when the company plans to issue a statement.
The jockeyeing between the two suitors -- complicated by strong rhetoric in Washington against the Chinese bid -- has raised fears among investors that an outright bidding war for Unocal could erupt.
Already, CNOOC (HKSE:0883.HK - News; NYSE:CEO - News) has tweaked its $18.5 billion bid made last month to provide additional assurances for Unocal, and its shares fell earlier on Thursday on fears it could be forced to raise its $67-a-share cash bid.
"On balance, I would not like to see CNOOC raising their bid too aggressively from here," said Edmund Harriss, fund manager at the Guinness Atkinson China & Hong Kong Fund, which owns about 11 million CNOOC shares. "I think they have offered a lot."
But a person familiar with the situation said no decision had been made yet on whether or when CNOOC would hike the bid and that reports of a $69-a-share offer were "pure speculation."
For now, CNOOC has agreed to set aside roughly $2.5 billion in an escrow account that would be paid to Unocal shareholders if the Chinese firm backed out of the deal, sources familiar with the situation have said.
Chevron, on the other hand, has continued to stand by its $16 billion-plus agreement signed in April, though some analysts and investors expect the company to sweeten its bid as a crucial vote by Unocal shareholders on Aug. 10 draws near.
Chevron must raise its bid or risk losing to CNOOC since Unocal shareholders are unlikely to vote in favor of the lower bid, Oppenheimer analyst Fadel Gheit said in a research note on Wednesday. Unocal's stock performance in recent weeks indicates that investors expect a higher bid, most likely from Chevron, Gheit said.
Shares of CNOOC fell 1.5 percent on Thursday -- after falling as much as 5 percent earlier in the day -- as investors fretted the Chinese oil company would sweeten its offer.
"The value for CNOOC will start to drop off quite significantly if they raise the bid too much further. I would not be comfortable with that," said Harriss.
Since CNOOC announced its bid for Unocal in late June, its stock had jumped nearly 19 percent in the three weeks ended on Wednesday.
CNOOC has been battling not just Chevron in this takeover battle, but growing opposition from some U.S. politicians, who say a purchase by a Chinese company could jeopardize national security interests.
In the latest move from Washington, a senior House Republican, whose district includes Chevron's San Ramon, California headquarters, wants to require the U.S. Energy Department review the Chinese bid as part of a sweeping energy bill that House and Senate negotiators began discussing on Thursday.
A CNOOC spokesman said California Republican Richard Pombo's move "crossed the line" and said that if implemented, could be tantamount to state control of business.
The Chinese company has agreed to make guarantees it can meet all U.S. national security-related requirements and sell its U.S. assets if required, sources have said.
CNOOC plans to respond tactically and immediately if the Unocal board rejects its bid or Chevron sweetens its offer, one source said. (Additional reporting by Michael Kardos in Los Angeles, Charlie Zhu in Singapore, Wendy Lim in Hong Kong, Mark McSherry and Ben Berkowitz in New York, Chris Baltimore in Washington)
With you still rooting for the Chinese government to win, apparently.
With you still rooting for the Chinese government to win, apparently.
Doesn't the Fed still have the final say-so, because of the foreign gov involvement?
LVM
The high bidder to win, whoever that might be.
Why don't you trust the market?
Strategic military considerations will always trump "the market".
And should.
It is very well-known that acquiring firms tend to overpay for targets, especially when there's a bidding war like this one. It's called the winner's curse. The fact that your competing bidder doesn't seem to care about overpaying compounds the problem.
I don't want state-owned enterprises running American companies. Just because it's a foriegn state running it makes it no less socialistic.
An no, I don't tust a state-owned enterprise to submit a rationale bid. The CEO said he had to win no matter what the cost. No one concerned with shareholder value thinks that way.
If it were the US government doing the nationalizing, they'd be howling. But if it's a foreign government, it somehow makes it okay.
Makes you wonder where their true loyalties lie, doesn't it?
If China buys this company, it won't be an American company very long. Most of its assets are in Southeast Asia. That's why the Chinese want it. They just sold their Canadian operation to another American company. They've got very little left that's based in North America, and what little they do have probably will not survive the acquisition and the security investigation. The US government will probably make them sell most of their American assets before approving the merger, and what is left will probably be sold by the Chinese simply because they don't need oil in the Gulf of Mexico. It's too far away.
And if they decide to keep it, so what? It's a mole on an elephant's behind.
Don't lose sleep over this one. Oil is oil. They need oil, and are willing to pay for it. We've got it, and Unocal wants to sell it to someone. China may or may not be the high bidder, but if they are, I don't see why we should make Unocal sell it to someone else for less. Get the best price they can for it. The Chinese are going to buy oil from someone, and there is no reason why we should not be the seller, if the price is right.
The "military" considerations on this deal are a fraud. The only consideration that the military has raised is the question of whether the drilling technology might be adapted to nuke testing.
Aside from the question of why we think that Chinese don't know how to test nukes, the obvious response, if one is required, is that you can easily make them divest themselves of that technology before selling the company. The Chinese really don't want the company anyway. They just want the oil reserves.
You really cannot tell why these stocks move from day to day. The media, of course, always has an answer, but whether it's the correct one, who knows?
You have inside knowledge of the Chicom government? Or of what they want us to believe?
The Chinese are going to buy oil from someone, and there is no reason why we should not be the seller, if the price is right.
They also have a long list of other things they'd like to buy that can be used to drive their military. We should just allow them to buy Boeing and Lockheed too, so long as the price is right?
FYI, other news from Thursday:
Maybe we shouldn't sell oil to anyone, then. Afterall, the buyer might just turn around and sell it to the Chinese.
Our country has made itself great by trusting the free market. I don't know why you think that we can do better than the free market in this instance.
Oil is fungible. It's not like airplanes or nuclear power plants (which by the way, we are also selling to China, but no one seems to care). Are you suggesting that we should ban Boeing from selling aircraft to China? GE has a big contract to build nuclear power plants in China. Why don't we stop that?
I'll tell you why. It's because we know that China already has nuclear technology. Selling them nuke plants is not giving them something they don't already have.
And it's the same way with oil, only more so. They can buy their oil from any number of sources that we don't control. We're not hurting them by refusing to do business with them. We're only hurting ourselves.
We didn't sell oil to the USSR when they were threatening us that I recall.
GE has a big contract to build nuclear power plants in China. Why don't we stop that?
We should, but there's too many people that only care about making money and don't see the military concerns of building up an adversary that is threatening us.
It's because we know that China already has nuclear technology. Selling them nuke plants is not giving them something they don't already have.
I would have liked to see you try to convince President Reagan that we were only hurting ourselves by not selling nuclear plants to the USSR. He probably wouldn't have even dignified you with a response.
We did not sell oil to the Russians, but we did sell food. Of course, if they had not bought it from us, they could easily have gotten it from several other countries. And in the end, we brought the Soviets down anyway. We did it by beating them economically--not on the battlefield.
I just think it's interesting that the guys who are making such a fuss about this oil deal, which can be structured so that it has absolutely no military significance, let the Boeing contract and the GE contract pass with nary a peep. And that is just the tip of the iceberg. Our computer industry has given China a lot of our high technology.
Yet, you are worried about the fact that we might be selling them oil. Not only that, but we are extracting from them a pretty good price for that oil, as well.
Of course, if you tried to stop the Boeing contract, there would be a scream of bloody murder from Congress. The Chinese would just buy their planes from Airbus, and Boeing would lose the deal. How does that help America?
Not if you widen the scope of your inquiry.
"The Chinese really don't want the company anyway. They just want the oil reserves."
And we shouldn't view this as properly within the scope of strategic military considerations? I think we should and, regardless of what DoD may have uttered for public consumption, you can count on our viewing everything Red China is doing through a strategic military lens.
Like I've said over and over, you aren't going to prevent China from getting oil by blocking this deal. The world is full of oil. You might make it a very little bit more expensive for them to get oil, but in the process, you cost yourself a lot of money, as well.
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