Investor Warns Unocal on Bid
An investment firm that owns more than 1 million shares of Unocal Corp. has told the El Segundo oil giant that it is legally obligated to shareholders to consider an $18.5-billion bid from China’s third-largest oil company because it is higher than an offer from Chevron Corp.
In a letter Wednesday to Unocal’s board, Peter Schoenfeld, chief executive of P. Schoenfeld Asset Management, wrote that “it is your duty to maximize value for stockholders,” and that “It is a violation of ... law for fiduciaries to enter into agreements that bar them from obtaining materially higher offers.”
Schoenfeld’s firm, which has offices in New York and London, invests money for pension funds and universities and controls less than 1% of the outstanding Unocal shares.
On July 20, Chinese oil firm CNOOC Ltd said it had no plans to increase its bid after El Segundo-based Unocal snubbed the Chinese bid in favor of a sweetened bid by rival San Ramon, Calif.-based Chevron valued at about $17 billion.
Although CNOOC’s bid is higher than Chevron’s, analysts have said it needs to be even higher to offset the risk to Unocal shareholders that the deal could be delayed or blocked by the U.S. government because of national security concerns. The Chinese government controls China National Offshore Oil Corp., which holds a 71% stake in publicly traded CNOOC.
“We have received the letter, but we cannot comment,” said Barry Lane, spokesman for Unocal, whose board has recommended that the Chevron bid be accepted at a special meeting scheduled for Aug. 10.
The Schoenfeld letter threatens legal action, telling the board “If you, as our fiduciary, persist in what we understand to be your refusal to seek to obtain an even higher offer from CNOOC and to take all steps necessary to procure that offer, including lobbying in Congress and at the White House, you will be personally liable to your stockholders for the lost premiums. Those damages will be at least several billion dollars.”
CNOOC in June offered to buy Unocal for $67 a share in cash, easily topping Unocal’s April 4 agreement to be acquired by Chevron in a stock-and-cash deal initially for $62 a share. Analysts have said CNOOC needs to raise its bid to $70 a share to win the deal.
In an interview late Sunday, Schoenfeld said he took the unusual step of writing a letter because of his concerns about political interference.
In Washington, lawmakers have called for additional studies regarding China’s energy policy prior to a government committee review of a possible deal. On July 20, the Senate approved a provision from Sen. Charles E. Schumer (D-N.Y.) to require a State Department report before a foreign, government-owned company could acquire a U.S. company.
“From our perspective it looks like a clear attempt to create a timing advantage for Chevron and stymie the bidding,” Schoenfeld said. “It’s entirely inappropriate.”
