Unocal May Seek Battle of Bidders
Directors of Unocal Corp. discussed an unsolicited $18.5-billion buyout offer from China’s CNOOC Ltd. but adjourned Thursday without publicly indicating their leanings on the matter, feeding speculation of a looming bidding war for the El Segundo oil company.
Unocal, which agreed in early April to be acquired by Chevron Corp. of San Ramon, Calif., has recommended that shareholders approve that deal at a special meeting Aug. 10. However, the company’s board said it would examine CNOOC’s competing bid and decide whether to change its endorsement.
Chevron’s cash-and-stock bid, originally worth about $16.9 billion, has fallen in value along with the company’s stock. On Thursday, Chevron shares fell 65 cents to $56.82, making its offer for Unocal worth about $16.4 billion, or $60.14 a share of Unocal stock.
In late June, CNOOC offered to buy Unocal for $67-a-share in cash. The bid from the company, 71% of whose stock is held by government-owned China National Offshore Oil Corp., unleashed a torrent of criticism in Washington, where legislators have objected to CNOOC’s courtship of Unocal on national security and economic grounds.
That point was underscored Thursday as Rep. Richard W. Pombo (R-Tracy) proposed an amendment to an energy bill to force a review by the Energy Department if CNOOC tries to buy Unocal.
The situation has forced Unocal board members to weigh the lower-priced bid from Chevron, which has already won government clearance, against the higher offer from CNOOC, which could be subjected to a lengthy and acrimonious process to get government approval.
After a long-anticipated meeting at Unocal’s headquarters, the board’s only public pronouncement Thursday was to declare a regular dividend of 20 cents a share.
“Unocal will move cautiously. They know that each decision will be examined under a microscope,” said Frederick S. Green, head of mergers and acquisitions at law firm Weil Gotshal & Manges. “It’s a very, very important, visible transaction.”
In recent days, speculation has centered on whether Chevron or CNOOC would improve their respective offers. Amid reports that CNOOC would put more than $2 billion in “earnest money” in a U.S. escrow account for Unocal, and that it might also raise its bid, investors sent CNOOC shares down $1.98, or more than 3%, to close Thursday at $60.88.
Unocal shares fell 46 cents to $66.29.
“If I’m Unocal, I am going to take my time and let them both sweat until the eleventh hour,” said Fadel Gheit, an analyst with Oppenheimer & Co. who owns shares in Chevron and Unocal.
