China’s Largest Oil Company Makes Bid for Unocal
By George Anderson
China’s largest offshore oil and gas producer, China National Offshore Oil Corporation (CNOOC) Ltd, has offered $67 in cash per each share of Unocal Corporation in a takeover
bid to rival Chevron Corporation. Chevron previously bid $65 a share for Unocal’s stock.
According to a report on TheStreet.com Web site, Unocal’s board is still recommending shareholders accept Chevron’s bid while it reviews the bid from CNOOC. Chevron announced
it had reached agreement with Unocal on a deal back in April.
A report on Asia Times Online said CNOOC’s chairman and CEO Fu Chengyu sent a letter to Unocal “saying that the company is seeking a consensual transaction with Unocal.”
CNOOC’s Fu, who earned a master’s degree in petroleum engineering from the University of Southern California, is confident the deal, if accepted by Unocal, will pass any regulatory
hurdles. “We believe the U.S. government will approve the deal,” he told Reuters. “Cash is cash. One hundred percent cash offers complete value certainty to Unocal shareholders,
as opposed to Chevron’s cash/stock offer.”
Moderator’s Comment: Do you have any concerns about Chinese company (in essence government) ownership of U.S. businesses?
We know that times change, but the last we looked China still considered itself a Communist nation. Our government has taken issue with China’s policy of
suppressing the rights of its citizens and threatening Taiwan. We guess Mr. Fu is right, “Cash is cash” and evidently that trumps personal beliefs. –
George Anderson – Moderator
Fu would seem to be a better capitalist than George. Sure the Chinese are communists, but in a global economy can we realistically have no contact with the world’s largest nation? If dealing with godless Reds is such a problem, why is it all right to try to sell our goods into China? And, if we were to stop trading with every country with human rights issues, the “Coalition of the Willing” in Iraq would have to be disbanded; we’d have to take care of our own political prisoners; American women would have to stop wearing diamond engagement rings; and a significant number of us would have to walk around naked. You can’t have it both ways and that’s what Mr. Fu is betting on.
Have any of you been to China lately? There are more cars in LA than in their entire country. And there isn’t much more room for them in places like Beijing where overcrowding is out of control. Moral issues aside, I would like to see the US build relations with the Chinese, but I’m unconvinced that this sale is the proper forum.
There are some public services that I think should always be state controlled and there is a fine line, in some cases, between services and businesses but I don’t think there is ever a case for the government of one country owning a business in another country. There are a number of foreign-owned private education concerns running an increasing number of schools in the UK and I think they need to be stopped yesterday. Oil companies are too important for the people of any given country to be subject to the whims and politics of another country regardless of who they are.
If push comes to shove, we can always nationalize foreign-owned businesses, as onerous as that sounds, it being the refuge of emerging third-world countries. Additionally, a couple of decades ago we were worried about Japan buying up the U.S. – and Disneyland, for Pete’s sake! Didn’t happen.
I’m all over Art Williams’ retort regarding reciprocity (that means I agree). Could this pending deal be the door-opener to reaching a business equilibrium with the country that’s soon to usurp our position as the top consumer on the globe?
The issue, though, is not bidness ownership, but almighty oil. China is our biggest competitor for available oil reserves and is, according to some, moving to monopolize it. If this deal were for anything other than an oil company, I’d say “cool.” But since it IS for an oil company, I say “don’t.”
Historymystery raises some interesting points, but we need to face facts. First of all, we really don’t need that Iraqi oil, now or in the future. Secondly, China will soon be online as a (the) major consumer of gasoline in the world. When that happens, is it better or worse for us if they have some stake in our economy? Make no mistake about it — the rest of the world will be really happy to sell them all the oil they can buy.
There are so many reasons why this deal is wrong for America, any business arguments aside.
Americans are dying every day so that we can be guaranteed a supply of Middle East oil into the indefinite future. (The war will have the reverse effect, ultimately, but that’s another story.) China will divert UNOCAL’s resources toward Chinese consumers, driving US prices even higher than they would have gone otherwise, and further destabilizing our economy.
This is a national defense issue, and President Bush needs to step in and say NO. Can you imagine FDR letting Mitsubishi (not state-owned, but heavily tied to the Imperial Japanese government at the time) buy Standard Oil–or Boeing, or Maytag–in 1935, if they had tried to do so?
There is a time when business people of all industries need to take a look beyond narrow self interest and do what’s right, even if it hurts the bottom line. UNOCAL shareholders will, I hope, do just that.
Stephan…I thought we did live in a country whose leaders used high gas prices for leverage. Isn’t that why we’re drilling in Alaska?
USA needs to watch out for this action, from China.
There are to many polictical, humane, and most importantly, economic negatives to China’s action.
Would any of us want to be controlled by a “State” that might use high gas prices for leverage? Just look at China’s “love” for its people! Hmmmm
A curious reverse question is could the U.S. government buy Chinese companies? I feel uncomfortable with the Chinese government-owned oil company buying a U.S. oil company, but in a strictly business sense, why not? Will this enable them to manipulate prices or cause supply and demand problems? Can or will they favor China in the future versus the U.S.?
What is the difference between Chinese government buying US government bonds and a state owned firm with private share holders buying a private US company? I think the first one is worse than the second one. By the way, Unocal only accounts for 1% of the US oil market. Over 70% of its business is in Asia.