|
|
|
|
Stock price helps CNOOC lick Unocal
wounds
BEIJING - China
National Offshore Oil Company Ltd (CNOOC) had the
space to sweeten its acquisition offer for US oil
company Unocal, but decided not to take any more
political risks, a company insider said here on
August 3.
"The company [gave] active
consideration to that [sweetening the offer]," the
insider told Xinhua under condition of anonymity.
"However, the unprecedented political opposition
triggered by CNOOC's bid offer in the US had
brought so much uncertainty to the risks of the
transaction and the chances of success that CNOOC
could not endanger the money of its shareholders
to make such a deal haunted by political factors,"
he said.
CNOOC announced on the night of
August 2 that it had withdrawn its acquisition
offer for Unocal, putting an end to a 40-day
merger bid, just eight days ahead of a final
decision to be reached by Unocal's shareholders.
The announcement cleared the way for Chevron
Corporation, the major rival of CNOOC in the bid
and the second-largest US oil company, to complete
its acquisition of Unocal, although its offer was
some US$700 million less than CNOOC's.
CNOOC, a subsidiary company of the
state-owned China National Offshore Oil
Corporation, announced on June 23 an all-cash bid
for Unocal Oil Company at $67 per share, totaling
$18.5 billion. It was the highest-ever acquisition
bid made overseas by a Chinese company. The bid,
however, met unexpected political opposition in US
political circles, where certain people viewed the
proposed merger as a threat to American security.
"CNOOC did have certain expectations [for]
possible opposition in the US when making the bid.
Nevertheless, the political storm triggered by the
deal has surpassed our expectations, as the
American Congress went as far as passing a law to
block the deal," said the CNOOC insider. He
referred to action taken last week by a
congressional conference committee, which added a
provision to a broad energy bill that would have
delayed the necessary government review of CNOOC's
offer by over 140 days, in effect making the CNOOC
bid less attractive to Unocal shareholders.
In contrast to the adverse situation CNOOC
had been forced into, Chevron passed nearly all
review proceedings of the government and won
support from the board of Unocal in late July.
Assuming it receives support from a special
meeting of Unocal's shareholders scheduled for
August 10, Chevron will soon complete its
acquisition move.
"It was the proper time
for CNOOC to quit the bid though it might [have
been] a reluctant choice," said Xing Houyuan, a
senior researcher with the Chinese Academy of
Trade and Economic Cooperation under the Ministry
of Commerce. "If CNOOC had further sweetened its
bid, CNOOC may finally have won the deal. But it
would have been made at too much economic cost and
under various unfair terms," she said.
"CNOOC's decision to withdraw the bid
after fully evaluating the commercial risks adds
proof that the bid was purely commercial," said
Zhang Wenkui, deputy director of the Enterprises
Economy Research Institute of the Development
Research Center of the State Council, China's
cabinet. According to Zhang, even if it had won
the deal, CNOOC would have had to face much
uncertainty and risk in the future from adverse
public opinion as well as continued opposition
from politicians in the United States.
China has seen more and more domestic
enterprises go out for overseas acquisitions in
recent years. Zhang said CNOOC's bid for Unocal
could provide valuable experience for other
Chinese enterprises which also have overseas
acquisition plans. A more prudent attitude should
be adopted by Chinese enterprises when making bids
for overseas energy enterprises, said Zhang.
In seeking international energy
cooperation, China should use more market measures
such as trade and futures. (Futures contracts can
be a means to secure supplies of commodities such
as oil, because they allow companies to lock in
future deliveries at a guaranteed price.)
Acquisition of overseas enterprises is not the
only or necessarily the best way, he noted.
According to analysts here, CNOOC had
suffered losses from its investment in the
preparation phase and will suffer possible losses
of profit sharing as a result of disclosing its
development strategy in the bid move. However, the
CNOOC insider said the company's withdrawal from
the Unocal bid would not have much effect on its
future development strategy.
CNOOC
shares surge
Hong Kong shares of CNOOC rose
as much as 5.5% August 3 to a record high on
investor relief that the Chinese oil firm had
scrapped its bid to buy the US oil and gas
producer Unocal. CNOOC shares surged as much as 30
HK cents (3.8 US cents) to HK$5.80 at the peak.
They closed at HK$5.55, a gain of 5 HK cents, or
0.9%. Hong Kong's benchmark Hang Seng index fell
0.1%. At Wednesday's close, CNOOC stock had risen
32% since the start of the year, lagging
dramatically behind a 77% gain in PetroChina, the
country's biggest oil producer.
Industry
analysts close to CNOOC said the share rise was
largely due to CNOOC's withdrawal from bidding
rivalry with US oil producer Chevron for Unocal.
The withdrawal has put an end to investor concerns
that the Hong Kong-listed oil giant might overpay
to outbid Chevron. "The investors are happy about
CNOOC's decision, because they thought the
all-cash offer might be too costly. Scrapping the
bid will surely clear up the uncertainty in the
Chinese oil company's finances and operations
relating to the proposed acquisition," said
Laurence Lau, a senior analyst with the Bank of
China (BOC) Hong Kong Limited. Lau argued that in
the long term, CNOOC's decision to pull out of the
race will mean the firm can focus more closely on
its core business, and will boost investor
confidence in the offshore oil producer.
Liu Gu, a senior energy analyst with
Guotai Jun'an Securities (Hong Kong) Ltd, told
China Daily that CNOOC's withdrawal will lead to
rising shares in the short term, but in the long
run, the decision also means a chance to expand
the global business has been lost. According to
BOC's Lau, the Chinese oil company has actively
sought possible acquisition opportunities across
the globe. The failure to buy Unocal, whose Asian
gas assets are very attractive to CNOOC, may push
the oil giant toward other acquisition
opportunities. Lau said the Chinese oil company is
gearing up to secure gas sources for its
extensively developing liquefied natural gas (LNG)
projects across the country. The central
government has given CNOOC the go-ahead to build
four LNG terminals along the country's eastern
coastal areas, in Fujian, Guangdong, Zhejiang and
Shanghai, according to Lau.
CNOOC's
bond ratings firm up
The decision to drop
the all-cash bid for Unocal has also led to rating
agencies revising CNOOC's bond rating levels. They
had previously considered downgrading the Chinese
oil company amid concerns that the Unocal bid
would increase its debt levels. But Fitch Ratings
affirmed the Chinese oil producer's rating at
"BBB+" with a positive outlook, the ratings
company said in a statement August 3.
Moody's confirmed its "A2" rating with a
stable outlook for both CNOOC and its state-owned
parent company, which controls 70% of the Hong
Kong-listed oil producer. CNOOC had been placed on
Rating Negative Watch by Fitch on June 24 because
the ratings company was concerned a bidding war
with Chevron could occur, and CNOOC might take on
more debt to finance the transaction. The raised
outlook was a result of "the strong fundamentals
of Chinese energy demand and the acknowledgment
that the company's credit metrics would be more
consistent with an issuer in a higher rating
category," the statement said.
(Asia
Pulse/XIC) |
|
|
|
|
|
|
|
 |
|
|
|
|
|
All material on this
website is copyright and may not be republished in any form without written
permission.
© Copyright 1999 - 2005 Asia Times
Online Ltd.
|
|
Head
Office: Rm 202, Hau Fook Mansion, No. 8 Hau Fook St., Kowloon, Hong
Kong
Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
|
|
|
|
