Wow! Hardball.
Unocal on Wednesday received a merger proposal from CNOOC Ltd.,an affiliate of China National Offshore Oil Corp., which offers to acquire all outstanding shares of Unocal for 67 US dollars per share in cash or a total of 18.5 billion US dollars in cash…
Oil analyst Fadel Gheit at Oppenheimer & Co. in New York said it would be the “pinnacle of hypocrisy” for the United States to put roadblocks in CNOOC’s way, considering that President Bush and other government officials had repeatedly scolded Russia for not opening its doors wide enough to US oil companies…
US Treasury Secretary John Snow said Thursday that the Bush government would review the takeover deal between CNOOC Ltd. and the US oil company for national security considerations.
“If we were dealing with a level playing field, with two U.S. companies, a bid of this size might be enough,” said Scott Keller, president of Analytics Research LLC, a New York-based research company, referring to the $18.5 billion that CNOOC has offered. “But given the xenophobic concerns already being expressed on Capitol Hill, the premium doesn’t outweigh the risks that this might be blocked.”…
“The hawks, the hardliners, are going to seize on this, particularly in Congress,” said Eric Heginbotham, a Washington- based senior fellow at the Council on Foreign Relations.
Unocal has reserves equivalent to about 1.75 billion barrels of oil, mostly in Southeast Asia, the Gulf of Mexico and the Caspian Sea region, according to company filings. Natural gas accounted for 61 percent of Unocal’s 2004 output.
The Federal Trade Commission will review the bid if it moves forward, just as the commission already reviewed Chevron. China’s bid, however, also will face scrutiny from the Committee on Foreign Investment in the United States, a panel that includes representatives from several federal agencies.
Federal law requires the committee to determine whether a takeover bid from a company controlled by a foreign government poses a threat to national security. The committee then reports to the president, recommending that he either approve a deal or block it.
The president makes the final choice. The whole process must not exceed 90 days.
At a hearing in the Senate Finance Committee, lawmakers pressed Treasury Secretary John Snow to conduct a review of the Chinese bid. Snow chairs the Committee on Foreign Investment in the United States, a panel that considers security risks of foreign firms buying or investing in U.S. companies and that has the power to block the deal.
“It’s hypothetical at this point because we don’t have a transaction,” Snow replied.
“Mr. Secretary, if you don’t review this one, that law is meaningless,” Sen. Ron Wyden, D-Ore., shot back.
Rep. Richard Pombo, R-Tracy, chairman of the House Resources Committee, said a Chinese takeover of Unocal would have “disastrous consequences for our economic and national security.”
“This should be a wake-up call for America to get as serious about energy as China appears to be,” Pombo said.
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