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Unocal may be split up by takeover deal

July 4th 2005

Unocal

The relationship between Beijing and Washington has become more complex in recent weeks with the attempted takeover of Unocal by one of China's three largest energy firms, CNOOC Ltd.  Chinese officials claim this transaction to be nothing more than a business matter.  The House of Representatives has seen it differently and passed a resolution urging President Bush to block the proposed takeover. 

The resolution vote in Congress was not even close, with 398 votes in favor and only 15 against.  One of the stumbling blocks is the fact that the majority control of CNOOC remains under the control of Chinese Government.  Many fear this as a threat by the Communist Party led state.  The resolution states the Chinese “would threaten to impair the national security of the United States”. 

 

In a written statement, the Chinese Foreign Ministry demanded the US Congress correct it’s mistake.  "We demand that the U.S. Congress correct its mistaken ways of politicizing economic and trade issues and stop interfering in the normal commercial exchanges between enterprises of the two countries …  CNOOC's bid to take over the U.S. Unocal company is a normal commercial activity between enterprises and should not fall victim to political interference. The development of economic and trade cooperation between China and the United States conforms to the interests of both sides."  

In recent years China’s consumption of oil has soared.  According to China Daily news the Chinese Government has urged China’s energy companies to buy foreign oil fields.  It is apparent that China is worried about it’s supplies.

CNOOC recently upped the stakes after Chevron made an offer of 16.5 billion dollars for Unocal.  CNOOC has now bid a staggering 18.5 billion dollars, making this the largest takeover of an American company by a Chinese firm if completed. 

The Chinese are hoping to clear this up by the time Unocal’s board of directors vote on the issue in late August.  The US Treasury Department has been asked to look into the plan by CNOOC.  The filing is a standard procedure in compliance with US rules on foreign acquisitions.  It is very unlikely the Treasury Department will expunge the proposed transaction.  They have only done so once in 1500 transactions examined. 

There may be a compromise between Chevron and CNOOC, splitting the assets.  It is possible that CNOOC would be given Unocal’s Thai natural gas assets and assets in Myanmar, Indonesia and Thailand.  Both sides would like to avoid driving the price up in a bidding war.  Unocal may be split up to avoid this.


By Dan Wilson
Best Syndication Staff Writer

 

Keywords and misspellings:  Exxon Mobil buy buying Business unical chevon shevron cina

 

 


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Copyright 2005 Best Syndication                                            Last Updated Sunday, July 11, 2010 01:18 AM