Thursday, August 04, 2005
LexisNexis(TM) Academic - Document
Copyright 2005 Nationwide News Pty Limited
The Australian
August 4, 2005 Thursday All-round Country Edition
SECTION: FINANCE; Pg. 27
LENGTH: 796 words
HEADLINE: CNOOC pays a high price for politics in Unocal takeover bid
SOURCE: MATP
BYLINE: Catherine Armitage
BODY:
Despite the setback, China is determined to secure its energy needs, writes China correspondent Catherine Armitage
CNOOC's aborted $US18.5 billion ($24 billion) offer for the middle-ranked US oil producer Unocal shows that at this early stage, the success of China's ambition to acquire overseas assets depends as much on its companies' ability to play politics as read the market.
The sorry fate of the bid demonstrates that China can be disquietingly ham-fisted at both.
Unocal would have been China's largest overseas takeover ever. The bid sent the strongest signal yet of its serious intent to secure strategic energy supplies abroad.
CNOOC, apparently caught unawares by the ferocious reaction to its bid on Capitol Hill, said efforts in Congress to delay or block any Chinese takeover were "regrettable and unjustified". The company decided against making a higher offer because of the "political environment", according to the statement.
This followed the astonishing intervention late last month by the Chinese foreign ministry in a letter to the US Congress demanding that it "correct its mistaken ways of politicising economic and trade issues and stop interfering in the normal commercial exchanges between enterprises of the two countries".
The close ties between the state-owned CNOOC, China's third-largest oil producer, and China's Communist Government were successfully exploited in Chevron's spoiling campaign.
There is no doubt the bid had government backing at the highest levels, and the funding also appeared to enjoy a government subsidy.
The foreign ministry's outrage at the notion of governments interfering in commercial transactions is also ironic considering its energetically successful campaign to stymie BHP Billiton's effort to strike a price with China for its iron ore which more closely reflected commercial reality.
But the market shared none of the Chinese side's disappointment on the failed Unocal bid, delivering a verdict of relief that the company would avoid a heavy debt burden by sending CNOOC shares to a record high on Tuesday.
In an earlier interview with The Washington Post CNOOC's chairman Fu Chengyu declared himself taken aback by the "overreaction" from Washington which he attributed to critics viewing China through a lens of 20 years ago.
"I didn't expect so many people would be sensitive to this. We are following a system that was set up by leading Western companies, especially the United States. We are walking along a path that they paved," he said.
However, it is not surprising that China should encounter the same kind of problems which greeted Japanese purchasers of US and Australian assets in the 1980s. Nor is it surprising that the proud Chinese defend themselves more vigorously than their more quietly-spoken Japanese rivals.
The biggest losers would be Unocal shareholders, followed by Chevron, insisted Beijing-based private energy consultant Han Xiaoping yesterday.
"They will damage their relations in China." Even if they succeed in the deal, their products won't be welcomed in China in the future, he said.
But he said the Chinese would not be deterred from further purchases of strategic energy resources. "The US can't control such things outside America," he said.
The CNOOC bid eclipsed both Lenovo's acquisition of the IBM personal computer business for $US1.75 billion and Haier's $US1.3 billion bid for fellow appliance maker Maytag, the ailing American producer of Hoover vacuum cleaners.
CNOOC's Fu Chengyu had described the offer as both "clearly superior for Unocal shareholders" and "good for America".
But was it good for China?
It came at a time of heightened concern over Chinese influence in the US economy and mounting fears about the US's energy security.
There was also precedent for the political backlash it sparked. Earlier in the year, a $US7 billion bid by China Minmetals for Canadian ore producer Noranda failed partly due an anti-Chinese backlash which has since seen the Canadian Government introduce a bill meant to block foreign takeovers on national security grounds.
Coverage in the official Chinese media yesterday was relatively restrained, with the government news agency Xinhua merely commenting that the US gained little by stopping the bid. Internet bulletin boards were feistier, with one typical posting proclaiming: "it's a waste of time to deal with the US. They are more like hooligans and less democratic than any other country!"
The experience would cause Chinese companies to be "more sober-minded" when considering their internationalisation strategies", said Ministry of Commerce researcher Mei Xinyu. He said companies needed to spend more time assessing the political risks of overseas bids.
LOAD-DATE: August 3, 2005
The Australian
August 4, 2005 Thursday All-round Country Edition
SECTION: FINANCE; Pg. 27
LENGTH: 796 words
HEADLINE: CNOOC pays a high price for politics in Unocal takeover bid
SOURCE: MATP
BYLINE: Catherine Armitage
BODY:
Despite the setback, China is determined to secure its energy needs, writes China correspondent Catherine Armitage
CNOOC's aborted $US18.5 billion ($24 billion) offer for the middle-ranked US oil producer Unocal shows that at this early stage, the success of China's ambition to acquire overseas assets depends as much on its companies' ability to play politics as read the market.
The sorry fate of the bid demonstrates that China can be disquietingly ham-fisted at both.
Unocal would have been China's largest overseas takeover ever. The bid sent the strongest signal yet of its serious intent to secure strategic energy supplies abroad.
CNOOC, apparently caught unawares by the ferocious reaction to its bid on Capitol Hill, said efforts in Congress to delay or block any Chinese takeover were "regrettable and unjustified". The company decided against making a higher offer because of the "political environment", according to the statement.
This followed the astonishing intervention late last month by the Chinese foreign ministry in a letter to the US Congress demanding that it "correct its mistaken ways of politicising economic and trade issues and stop interfering in the normal commercial exchanges between enterprises of the two countries".
The close ties between the state-owned CNOOC, China's third-largest oil producer, and China's Communist Government were successfully exploited in Chevron's spoiling campaign.
There is no doubt the bid had government backing at the highest levels, and the funding also appeared to enjoy a government subsidy.
The foreign ministry's outrage at the notion of governments interfering in commercial transactions is also ironic considering its energetically successful campaign to stymie BHP Billiton's effort to strike a price with China for its iron ore which more closely reflected commercial reality.
But the market shared none of the Chinese side's disappointment on the failed Unocal bid, delivering a verdict of relief that the company would avoid a heavy debt burden by sending CNOOC shares to a record high on Tuesday.
In an earlier interview with The Washington Post CNOOC's chairman Fu Chengyu declared himself taken aback by the "overreaction" from Washington which he attributed to critics viewing China through a lens of 20 years ago.
"I didn't expect so many people would be sensitive to this. We are following a system that was set up by leading Western companies, especially the United States. We are walking along a path that they paved," he said.
However, it is not surprising that China should encounter the same kind of problems which greeted Japanese purchasers of US and Australian assets in the 1980s. Nor is it surprising that the proud Chinese defend themselves more vigorously than their more quietly-spoken Japanese rivals.
The biggest losers would be Unocal shareholders, followed by Chevron, insisted Beijing-based private energy consultant Han Xiaoping yesterday.
"They will damage their relations in China." Even if they succeed in the deal, their products won't be welcomed in China in the future, he said.
But he said the Chinese would not be deterred from further purchases of strategic energy resources. "The US can't control such things outside America," he said.
The CNOOC bid eclipsed both Lenovo's acquisition of the IBM personal computer business for $US1.75 billion and Haier's $US1.3 billion bid for fellow appliance maker Maytag, the ailing American producer of Hoover vacuum cleaners.
CNOOC's Fu Chengyu had described the offer as both "clearly superior for Unocal shareholders" and "good for America".
But was it good for China?
It came at a time of heightened concern over Chinese influence in the US economy and mounting fears about the US's energy security.
There was also precedent for the political backlash it sparked. Earlier in the year, a $US7 billion bid by China Minmetals for Canadian ore producer Noranda failed partly due an anti-Chinese backlash which has since seen the Canadian Government introduce a bill meant to block foreign takeovers on national security grounds.
Coverage in the official Chinese media yesterday was relatively restrained, with the government news agency Xinhua merely commenting that the US gained little by stopping the bid. Internet bulletin boards were feistier, with one typical posting proclaiming: "it's a waste of time to deal with the US. They are more like hooligans and less democratic than any other country!"
The experience would cause Chinese companies to be "more sober-minded" when considering their internationalisation strategies", said Ministry of Commerce researcher Mei Xinyu. He said companies needed to spend more time assessing the political risks of overseas bids.
LOAD-DATE: August 3, 2005
# posted by Eastlaw @ 12:18 AM 
