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Last Updated: Thursday, 23 June, 2005, 09:50 GMT 10:50 UK
China oil firm in Unocal bid war
CNOOC chairman and chief executive Fu Chengyu
CNOOC wants Unocal and the US to see its offer as friendly
China's biggest offshore oil and gas producer has opened a bidding war for Unocal, the ninth-biggest US oil firm.

China National Offshore Oil Corporation (CNOOC) has bid $18.5bn (9.8bn) in cash for Unocal, which has large production operations in Asia.

It is the biggest takeover offer by a Chinese firm and comes a day after Haier's bid for Hoover maker Maytag.

Unocal has said it will consider the bid but remains committed to an agreed $18bn merger with Chevron.

Cash lure

CNOOC's $67-a-share offer was agreed after a lengthy board meeting and the firm is hoping that its all-cash bid will prove more enticing to investors than Chevron's mix of shares and money.

Analysts have raised concerns about CNOOC's bid, however, pointing to the fact that it may face hostility in the US and that it will have to take on billions of dollars in debt to finance it.

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They also said that Chevron's bid has already won the approval of the US Federal Trade Commission, the main anti-monopoly regulator, leaving few remaining obstacles.

In an interview with the Reuters news agency, CNOOC chief executive and chairman Fu Chengyu said he was "quite confident" that his firm's offer would be accepted, adding that the move for Unocal was friendly.

"We believe the US government will approve the deal," he said.

The company's chief financial officer Yang Hua told Dow Jones Newswires that CNOOC is "prepared to closely cooperate to get US approval for this deal".

"We believe the offer will be very good for America as we are going to protect US jobs while continuously marketing [Unocal's] products in the US," Mr Yang was reported as saying.

Fast track

Chevron countered by saying that it offered a better bet for investors than CNOOC and that it planned to complete its takeover transaction during August.

"We're doing everything we can to move this quickly," Reuters reported George Kirkland, head of exploration and production at Chevron, as saying.

Chinese companies are quite aggressive now in mergers and acquisitions, just like Japan was several years ago
Belle Liang, Core Pacific Yamaichi

Rumours that CNOOC was eyeing up Unocal began circulating in late 2004. Analysts said Unocal's exposure to oil-thirsty Asian markets would make it a good fit.

CNOOC is the largest foreign offshore oil producer in Indonesia, for instance.

The widespread assumption then was that CNOOC would keep hold of Unocal's Asian assets, and sell off the rest of the company.

A CNOOC bid could face Congressional opposition on issues ranging from China's trade surplus to US oil security.

Two US congressmen have written to President George W Bush ahead of the bid opposing any Chinese takeover of US oil interests.

Slick operation

State-controlled CNOOC was one of four big oil groups that emerged after the 1999 restructuring of China's oil industry.

CNOOC was given offshore exploration and production assets, and had to work closely with foreign oil majors to improve its offshore technology.

Unocal truck at oil storage facility
Unocal's Asian assets are proving attractive as demand for oil soars

Oil analysts say it has the Chinese oil sector's most professional management team, as a result.

Alongside Shell, it shares ownership of the $4.3bn Daiyu Bay petrochemical plant that is China's biggest joint-venture investment.

CNOOC's shares are traded in Hong Kong and New York as a well as having a domestic Shanghai listing. In Hong Kong, they rose as much as 1.8% to HK$4.25 in morning trading.

The bid for Unocal comes as a number of Chinese firms are looking to expand abroad.

Last year Chinese computer maker Lenovo bought IBM's PC operations for $1.7bn, while this week fridge and washing machine maker Haier bid $1.28bn for US domestic appliance group Maytag.

"Chinese companies are quite aggressive now in mergers and acquisitions, just like Japan was several years ago," said Belle Liang of Core Pacific Yamaichi. "Now the mergers and acquisitions trend falls to China."

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