CHINA: News Update: CNOOC ends bid for Unocal: fallout:
Chengyu Fu, Chairman and CEO of CNOOC (Chinese National Offshore Oil Corporation, announced today the withdraw of CNOOC's $18.5 billion cash bid. With the political intrigue surrounding the bid, it does not come as a surprise, but the ramifications are no less mitigated.
The CNOOC bid was a $18.5 billion cash bid compared to Chevron's $17 billion mixed stock, cash and debt bid.
The Chevron offer is already cleared by both boards and the FTC. The CNOOC bid faced a uphill battle against regulators and politicians in Washington. Without this opposition the CNOOC bid is a more attractive offer.
It is in this opposition by American politicians that we see the fallout from the failed bid. The main point of contention that would be apparent is that of a company 70% owned by the Chinese government having holdings of oil and natural gas reserves in the US.
However, CNOOC proposed a divestiture of Unocal's energy holdings in the US to allay US concerns about strategic reserve control. CNOOC is primarily interested in UNOCAL's primary holdings, which are based in Asia.
Here is where the seeming double-standard emerges. The US holds oil and natural gas reserves in Asia but will not allow an Asian company to hold reserves in the US.
The flip-side to this argument is that CNOOC's bid consisted of $7 billion directly from the Chinese goverment and $6 billion in low-interest rate loans from State Banks.
The additional point to consider is CNOOC's promise to preserve American jobs while Chevron is clearly looking at slashing some jobs to achieve its projected $325 million savings from the merger.
Takeaway: As the Chinese economy continues to grow, Chinese companies will look to make acquisitions abroad to access new markets, distribution channels, brands. Understanding the interplay of politics and economics in this changing world is crucial in spotting deals with a high Beta risk and volatility. These surprise plays will offer the best points to capture mis-pricing.
NYTimes Coverage
The CNOOC bid was a $18.5 billion cash bid compared to Chevron's $17 billion mixed stock, cash and debt bid.
The Chevron offer is already cleared by both boards and the FTC. The CNOOC bid faced a uphill battle against regulators and politicians in Washington. Without this opposition the CNOOC bid is a more attractive offer.
It is in this opposition by American politicians that we see the fallout from the failed bid. The main point of contention that would be apparent is that of a company 70% owned by the Chinese government having holdings of oil and natural gas reserves in the US.
However, CNOOC proposed a divestiture of Unocal's energy holdings in the US to allay US concerns about strategic reserve control. CNOOC is primarily interested in UNOCAL's primary holdings, which are based in Asia.
Here is where the seeming double-standard emerges. The US holds oil and natural gas reserves in Asia but will not allow an Asian company to hold reserves in the US.
The flip-side to this argument is that CNOOC's bid consisted of $7 billion directly from the Chinese goverment and $6 billion in low-interest rate loans from State Banks.
The additional point to consider is CNOOC's promise to preserve American jobs while Chevron is clearly looking at slashing some jobs to achieve its projected $325 million savings from the merger.
Takeaway: As the Chinese economy continues to grow, Chinese companies will look to make acquisitions abroad to access new markets, distribution channels, brands. Understanding the interplay of politics and economics in this changing world is crucial in spotting deals with a high Beta risk and volatility. These surprise plays will offer the best points to capture mis-pricing.
NYTimes Coverage
posted by howa at
8/02/2005
