Los Angeles – The Chinese oil and gas company seeking to buy Unocal Corp. said Wednesday it would stick by its current bid – even after Unocal’s board endorsed a sweetened offer from rival bidder Chevron Corp.
“We regret that they have not yet embraced our offer,” CNOOC Ltd. said in a prepared statement. “We will continue to monitor the situation actively.”
Chevron has boosted its cash and stock offer by about $2.50 per share to $63 per share – or $17 billion overall.
CNOOC, an affiliate of China National Offshore Oil Corp., has an $18.5 billion offer on the table for the El Segundo, Calif.-based company.
The deal has met stiff opposition in Congress because CNOOC is 70 percent owned by the Chinese government.
Regardless of who tenders the winning bid, China’s “forceful action to secure energy supplies” deserves careful scrutiny, said Greg Schnacke, executive vice president of the Colorado Oil and Gas Association.
“Clearly the Chinese and Indians and Pacific Rim countries are in an industrial revolution and in a worldwide search for energy supplies,” he said.
Those nations are taking decisive action while the U.S. is debating its domestic energy policies, Schnacke added.
Analysts said CNOOC most likely will have to increase its offer and add a substantial financial guarantee if it wants to persuade Unocal shareholders to reject the Chevron bid in a vote scheduled for Aug. 10.
“It is too late for them (CNOOC) to pull out,” said Fadel Gheit, an analyst with Oppenheimer who covers Unocal. “You are not dealing with a bunch of investors. You are dealing with the pride of the Chinese Communist Party.”
Gheit believes CNOOC would have to raise its bid to around $70 a share and offer a guarantee to Unocal shareholders, who stand to take a hit if they reject the Chevron bid only to see the CNOOC bid scuttled by federal regulators.
The guarantee would have to be around $7 a share, or as much as $3 billion, Gheit said.
Other analysts said the Chevron bid is superior and should prevail despite its lower value because it carries fewer “closing risks” and is backed by the Unocal board.
“While it is difficult to determine CNOOC’s ultimate response, it appears clear the Unocal board favors Chevron over CNOOC and the narrowing of the two bids makes it more compelling for investors to approve the transaction Aug. 10,” analyst Bruce Lanni of A.G. Edwards wrote in a note to clients.
Denver Post staff writer Kimberly S. Johnson contributed to this report.
