Wednesday, July 27, 2005
LexisNexis(TM) Academic - Document
LexisNexis(TM) Academic - Document
Copyright 2005 The Financial Times Limited
Financial Times (London, England)
July 27, 2005 Wednesday
London Edition 1
SECTION: COMPANIES INTERNATIONAL; Pg. 28
LENGTH: 782 words
HEADLINE: Chinese at odds with Congress over worth of deal: Legislative amendment makes it more difficult for the Chinese group to win bid battle for the US oil company, writes Francesco Guerrera
BYLINE: By FRANCESCO GUERRERA and SHEILA MCNULTY
DATELINE: HOUSTON
BODY:
Last month, Fu Chengyu, CNOOC's chairman and chief executive, hailed the Chinese company's USDollars 18.5bn bid for the US oil and gas group Unocal as "good offer for Unocal . .. a good offer for America".
Yesterday, US lawmakers showed just how much they disagree with that statement. By passing a legislative amendment that delays the conclusion of any regulatory probe into a CNOOC/ Unocal merger by nearly two months, they pushed a rival USDollars 17.3bn cash-and-share offer from Chevron a step closer to the finishing line.
Although the amendment was watered down from a previous, more radical draft, it will make it more difficult, and probably more expensive, for Mr Fu to convince Unocal and its shareholders to accept the regulatory risks of the CNOOC's bid.
With Chevron likely to seal the deal at a Unocal shareholders' vote on August 10 unless Unocal switches its recommendation to an improved offer from the state-controlled Chinese company, Mr Fu faces an uphill task.
"There is no doubt the outcome of the Congressional meeting was negative," said a person close to CNOOC yesterday. "But it was better than it could have been and the company is still focused on the deal."
Yet, CNOOC's situation could have been completely different had Mr Fu dealt Chevron a knock-out blow by raising its offer to about USDollars 19bn earlier this month - before the US oil major sweetened its own bid.
According to a regulatory filing by Chevron, on July 15 Charles Williamson, Unocal's chief executive, urged Mr Fu "to make his best offer", arguing that "a sufficiently large increase in the proposed consideration could likely result in a conclusion of the process".
The message was clear: raise the bid and Unocal is yours. A day later, Mr Fu replied that CNOOC would consider raising its bid from the current USDollars 67 per Unocal share to USDollars 69 - an increase of some USDollars 500m.
However, somewhat unexpectedly, the Chinese executive attached two conditions. The first was that Unocal lobby together with CNOOC to defuse the mounting political hostility on Capitol Hill.
On the second, crucial, condition, accounts diverge. According to the filing, Mr Fu angered Mr Williamson by demanding that Unocal pick up the USDollars 500m break-up fee due to Chevron.
The Unocal chief rejected the deal and "expressed dissatisfaction" that Mr Fu wanted to go back on an agreement to pay the break-up fee, the Chevron document says.
People close to CNOOC dispute this version of events, which suggests Mr Fu missed a crucial chance to defeat Chevron over a relatively minor issue. In their recollection, Mr Fu requested that Unocal pay the break-up fee only in the event the deal was blocked by the White House on national security grounds. Had CNOOC succeeded in buying Unocal, it would have compensated Chevron as agreed.
In CNOOC's view, any veto would be an overtly political move as the Chinese company had already pledged to sell all of Unocal's US assets if requested by regulators.
"Having done everything possible to allay the regulators' fears, CNOOC wanted Unocal to take on the risk the deal might be blocked by events beyond our control," says a person close to CNOOC. "To walk away defeated is one thing but to walk away defeated by a political decision and having to pay Dollars 500m is another thing".
Whatever the details of the deal, Unocal's rejection means CNOOC is likely to have to withdraw that condition if it decides to raise the bid in the next few days.
At least the Chinese company can be reasonably sure that a 10 per cent premium on Chevron's offer should secure Unocal board's approval. The filing shows that on two occasions, on July 14 and July 17, when Chevron's offer was worth about USDollars 61 and CNOOC's USDollars 67 per share, the board was ready to back the Chinese company.
"The consensus of the board ... was that, in light of the current value differential between the Chevron merger agreement and the CNOOC proposal ... the board's inclination would be to withdraw its recommendation of the Chevron transaction," it says.
Given Chevron's current offer, CNOOC would have to bid about USDollars 69 per share to open that kind of gap. In its own filings, Unocal explains its decision to back Chevron's lower offer by pointing to the long delays and higher risks associated with CNOOC's offer.
But the biggest uncertainty in this takeover battle is whether Unocal regards the delay imposed by Congress as significant enough to require the Chinese company to bid more than USDollars 69. And whether, if asked to bid even higher, Mr Fu decides such an offer is good for Unocal, good for America and good for CNOOC. Additional reporting by Sheila McNulty in Houston
LOAD-DATE: July 27, 2005
Copyright 2005 The Financial Times Limited
Financial Times (London, England)
July 27, 2005 Wednesday
London Edition 1
SECTION: COMPANIES INTERNATIONAL; Pg. 28
LENGTH: 782 words
HEADLINE: Chinese at odds with Congress over worth of deal: Legislative amendment makes it more difficult for the Chinese group to win bid battle for the US oil company, writes Francesco Guerrera
BYLINE: By FRANCESCO GUERRERA and SHEILA MCNULTY
DATELINE: HOUSTON
BODY:
Last month, Fu Chengyu, CNOOC's chairman and chief executive, hailed the Chinese company's USDollars 18.5bn bid for the US oil and gas group Unocal as "good offer for Unocal . .. a good offer for America".
Yesterday, US lawmakers showed just how much they disagree with that statement. By passing a legislative amendment that delays the conclusion of any regulatory probe into a CNOOC/ Unocal merger by nearly two months, they pushed a rival USDollars 17.3bn cash-and-share offer from Chevron a step closer to the finishing line.
Although the amendment was watered down from a previous, more radical draft, it will make it more difficult, and probably more expensive, for Mr Fu to convince Unocal and its shareholders to accept the regulatory risks of the CNOOC's bid.
With Chevron likely to seal the deal at a Unocal shareholders' vote on August 10 unless Unocal switches its recommendation to an improved offer from the state-controlled Chinese company, Mr Fu faces an uphill task.
"There is no doubt the outcome of the Congressional meeting was negative," said a person close to CNOOC yesterday. "But it was better than it could have been and the company is still focused on the deal."
Yet, CNOOC's situation could have been completely different had Mr Fu dealt Chevron a knock-out blow by raising its offer to about USDollars 19bn earlier this month - before the US oil major sweetened its own bid.
According to a regulatory filing by Chevron, on July 15 Charles Williamson, Unocal's chief executive, urged Mr Fu "to make his best offer", arguing that "a sufficiently large increase in the proposed consideration could likely result in a conclusion of the process".
The message was clear: raise the bid and Unocal is yours. A day later, Mr Fu replied that CNOOC would consider raising its bid from the current USDollars 67 per Unocal share to USDollars 69 - an increase of some USDollars 500m.
However, somewhat unexpectedly, the Chinese executive attached two conditions. The first was that Unocal lobby together with CNOOC to defuse the mounting political hostility on Capitol Hill.
On the second, crucial, condition, accounts diverge. According to the filing, Mr Fu angered Mr Williamson by demanding that Unocal pick up the USDollars 500m break-up fee due to Chevron.
The Unocal chief rejected the deal and "expressed dissatisfaction" that Mr Fu wanted to go back on an agreement to pay the break-up fee, the Chevron document says.
People close to CNOOC dispute this version of events, which suggests Mr Fu missed a crucial chance to defeat Chevron over a relatively minor issue. In their recollection, Mr Fu requested that Unocal pay the break-up fee only in the event the deal was blocked by the White House on national security grounds. Had CNOOC succeeded in buying Unocal, it would have compensated Chevron as agreed.
In CNOOC's view, any veto would be an overtly political move as the Chinese company had already pledged to sell all of Unocal's US assets if requested by regulators.
"Having done everything possible to allay the regulators' fears, CNOOC wanted Unocal to take on the risk the deal might be blocked by events beyond our control," says a person close to CNOOC. "To walk away defeated is one thing but to walk away defeated by a political decision and having to pay Dollars 500m is another thing".
Whatever the details of the deal, Unocal's rejection means CNOOC is likely to have to withdraw that condition if it decides to raise the bid in the next few days.
At least the Chinese company can be reasonably sure that a 10 per cent premium on Chevron's offer should secure Unocal board's approval. The filing shows that on two occasions, on July 14 and July 17, when Chevron's offer was worth about USDollars 61 and CNOOC's USDollars 67 per share, the board was ready to back the Chinese company.
"The consensus of the board ... was that, in light of the current value differential between the Chevron merger agreement and the CNOOC proposal ... the board's inclination would be to withdraw its recommendation of the Chevron transaction," it says.
Given Chevron's current offer, CNOOC would have to bid about USDollars 69 per share to open that kind of gap. In its own filings, Unocal explains its decision to back Chevron's lower offer by pointing to the long delays and higher risks associated with CNOOC's offer.
But the biggest uncertainty in this takeover battle is whether Unocal regards the delay imposed by Congress as significant enough to require the Chinese company to bid more than USDollars 69. And whether, if asked to bid even higher, Mr Fu decides such an offer is good for Unocal, good for America and good for CNOOC. Additional reporting by Sheila McNulty in Houston
LOAD-DATE: July 27, 2005
# posted by Eastlaw @ 12:43 AM 
