CNOOC, China’s third-largest oil producer, made the bid yesterday, saying its effective merger plan was a friendly, all-cash proposal that was superior to Chevron’s.
The deal was fully financed, subject to customary closing conditions.CNOOC chairman and chief executive Fu Chengyu said his company’s offer contained better commitments, particularly concerning Unocal's US assets, than did the Chevron deal.
Unocal acknowledged the offer and said it would evaluate the bid, but its board's previous recommendation to shareholders to accept the Chevron offer remained.
Chevron reaffirmed its bid, saying its offer combined “compelling value, regulatory certainty and accelerated timing”, and provided a superior transaction for Unocal stockholders.
The Chevron deal, made in April, offered Unocal shareholders a choice of accepting US$65 per share in cash, 1.03 shares of Chevron stock, or a combination of stock and cash.
Chevron also noted its merger agreement had been approved by the US Federal Trade Commission and the boards of both companies.
It is understood that Chevron's deal to buy Unocal carries a US$500 million break-up fee, meaning CNOOC, if successful, would have to pay Chevron US$500m.
CNOOC said it and Unocal both had a significant presence in Asia and estimated about 85% of the combined reserves of the companies were in Asia and the Caspian region.
A Unocal acquisition would more than double CNOOC’s oil and gas production and increase its reserves by almost 80%, to reach about 4 billion barrels of oil equivalent.
This would give the combined company a leading position in the Asian energy market and an expanded role in the development of China's LNG market.
Fu said CNOOC was committed to integrating Unocal's management and workforce into the combined company. CNOOC would seek to retain “substantially all” Unocal employees, including those in the US, in contrast to the existing Chevron proposal where Chevron had already announced cost-saving plans that included staff layoffs.
A transaction would not adversely affect the US oil and gas market since Unocal's US petroleum production – less than 1% of total US consumption - would continue to be sold in the US.
Fu also said the transaction was expected to be earnings-per-share and cashflow per share accretive in the first full year after completion. CNOOC anticipated maintaining a strong, investment-grade credit rating.
China's rapid economic growth has turned the nation into the world's second-largest consumer of oil after the United States and its expanding energy needs have helped push crude oil prices up by over 50% in the past 12 months.
