CNOOC chairman says Unocal bid going ahead

Unocal mails proxy materials on Chevron offer; Chinese government says offer a purely commercial transaction

Joe McDonald

Associated Press Writer

Chinese oil company CNOOC Ltd. will press ahead with its takeover bid for Unocal Corp. despite a planned shareholder vote on a lower offer by Chevron Corp., which Unocal’s board says should be accepted, CNOOC’s chairman said June 30.

In an interview with The Associated Press, Fu Chengyu expressed confidence the state-controlled oil company will persuade Washington the proposed $18.5 billion deal for the ninth-largest U.S. oil company doesn’t pose any risks to American national security.

“We’ll continue to talk in negotiations, and we will meet with government figures for the (security) review,” Fu said. “I believe that our superior offer, which will help shareholders, this will convince the U.S. government this is a good offer.”

Fu’s comments came after Unocal sent its shareholders proxy materials June 30 with a letter reiterating its board’s recommendation to accept the $16.6 billion offer by Chevron.

CNOOC says its all-cash offer will benefit the United States by paying Unocal shareholders more and resulting in fewer job losses. Chevron has countered that its offer already has received regulatory approval and a switch to CNOOC could require lengthy new reviews.

Fu wouldn’t say whether CNOOC might raise its offer.

“I think this is a kind of strategy that shouldn’t be discussed,” he said. “We don’t have firm plans as to what we’ll do. But we do have something that we are developing.”

CNOOC: offer driven by economics

“This company is driven purely by economics,” he said. “If there’s a good market, the more we can supply, the more value we can add for shareholders. Not because the government asked us to do it, but because we believe it’s the profitable thing to do.”

He said that although CNOOC’s parent company is promising to supply $7 billion of the proposed purchase price, none of that money would come from the Chinese government.

“Not a cent,” he said.

Earlier June 30, the Chinese government tried to mollify American anxiety about the bid, insisting it is a purely commercial transaction and saying it hopes to see both the United States and China benefit.

“China wants to find a ‘win-win’ result,” said Foreign Ministry spokesman Liu Jianchao.

Liu repeated Beijing’s plea to Washington not to let politics interfere with what he insisted is a purely commercial affair.

“This issue is a commercial transaction between two companies, and a normal exchange between China and the United States,” Liu said. “It should stay free of political interference.”

China tells Congress to stop interfering

American politicians had warned the $18.5 billion takeover bid announced in June could pose risks to U.S. national security and called for a full review by the Bush administration.

The Chinese company’s officials have welcomed a security review and denied that CNOOC was acting on behalf of China’s government, which is in the midst of a multibillion-dollar campaign to secure foreign oil and gas supplies to power its booming economy.

“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,” the Chinese Foreign Ministry said in a statement released July 5.

China has been insisting CNOOC’s offer is pure business. “CNOOC’s bid to take over Unocal is a normal commercial activity between enterprises and should not fall victim to political interference,” said the statement.

Developing bilateral economic and trade cooperation is in the interests of both sides, the statement said.

CNOOC is bidding against Chevron Corp. for Unocal, the ninth-largest U.S. oil and gas firm. The Chinese firm has argued that its offer will benefit the United States by paying Unocal shareholders more and causing fewer job losses.

—The Associated Press