CNOOC offers US$18.5b for Unocal takeover
(Agencies)
Updated: 2005-06-23 09:00

China National Offshore Oil Corporation (CNOOC) announced a bid to buy US oil major Unocal for 18.5 billion dollars cash, trumping a rival offer by ChevronTexaco.

Fu Chengyu, Chairman and CEO of China's energy giant China National Offshore Oil Corporation (CNOOC) is seen here in 2004. CNOOC has agreed to launch the biggest ever takeover offer by a Chinese group with a US$19 billion bid for US oil major Unocal, according to a report. [AFP/file]

CNOOC, China's third-largest oil group, said it was proposing a friendly merger with Unocal, offering 67 dollars a share for the California-based company.

It tops the merger deal Chevron hammered out with Unocal by 1.5 billion dollars using Unocal's June 21 closing share price of 64.85 dollars, CNOOC said in a statement on its website.

ChevronTexaco, the number-two US oil company, announced its takeover bid for Unocal in April. It received US regulatory approval on June 10.

In a letter sent to the Chairman of Unocal, CNOOC Limited Chairman and CEO Fu Chengyu stressed that the approach is friendly and the company is seeking a consensual transaction with Unocal. This proposal is being submitted in accordance with the sale process initiated by Unocal.

"This friendly, all-cash proposal is a superior offer for Unocal shareholders," said CNOOC chairman and chief executive Fu Chengyu said.

"For our shareholders, there is a strong business rationale for the combination, as CNOOC Ltd and Unocal would form one of the leading international EP companies and become one of the premier players in the Asian energy market."

If successful, it would represent the biggest overseas acquisition by a Chinese mainland company, dwarfing Lenovo Group's 1.25 billion dollar takeover of IBM's global personal computer business.

"CNOOC believes that the merged group would benefit greatly from the companies' complementary strengths," the statement added.

It said that unlike the Chevron bid, its offer would guarantee no jobs losses.

"CNOOC will seek to retain substantially all Unocal employees, including those in the US," it said.

"This is in contrast to the existing Chevron proposal where Chevron has already announced plans to extract hundreds of millions of dollars of cost savings from the merger annually, including from employee layoffs."

The US giant has more than 6,000 employees, with most of its activities in Asia and North America. It has no refining or marketing operations.

Reports have said CNOOC has secured financing from leading mainland and foreign banks, and was in talks with several international investment firms on the possibility of them taking strategic stakes in the venture.

The announcement, widely expected by investors, fits into a larger Chinese strategy of securing access to energy sources overseas.

Unocal has gas and oil reserves in Thailand, Indonesia and Central Asia.

In the statement, CNOOC said it expects the proposed merger to more than double its oil and gas production and increase its reserves by nearly 80 percent to about four billion barrels of oil equivalent.

The merged group would also have an improved oil and gas balance, with total reserves of approximately 53 percent oil and 47 percent natural gas, it said.

About 70 percent of Unocal's current proved oil and gas reserves are in Asia and the Caspian region.