Unocal may be split up
by takeover deal
July 4th 2005
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
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.
Best Syndication Staff Writer
Keywords and misspellings: Exxon Mobil buy
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