Chinese takeaway

23 June 2005

But there’s no certainty the Chinese bid will pass muster with either the company or the US government. Stateowned CNOOC looks to have delivered a knockout blow by offering some $1.5bn more for the US oil company than Chevron’s bid.

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Chinese stateowned oil company CNOOC offered to buy US producer Unocal for $18.5bn in cash, topping an earlier offer from Chevron by $1.5bn.

CNOOC, which will also assume $1.1bn of debt and pay a $500m break fee if its offer is successful, said its bid was a friendly one and that it sought a consensual deal with Unocal. The firm said it would retain most of Unocal's employees and that it would continue to sell Unocal's US oil and gas output there.

Unocal said it would evaluate CNOOC's bid, but that its board continued to recommend Chevron's offer.

CNOOC said it would borrow $16n from its parent company and banks to finance the offer. It has secured $3bn of bridging loans from Goldman Sachs and JP Morgan Chase, and another $6bn loan from the Industrial and Commercial Bank of China. The rest it will borrow from its parent, China National Offshore Oil Corp.

The deal, if successful, would be the largest overseas acquisition by a Chinese firm. Two US congressmen have already urged the Bush administration to review the bid. But Lee Raymond, the head of Exxon, said it would be a big mistake for the US to block the deal.

You have to have free trade, Raymond said. If you start to put inefficiencies into the system all of us eventually pay for that.

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