Mother_KISSER
06-23-2005, 04:29 PM
Washington gets into fray on Unocal bid
Politicians discuss a possible deal's effects on oil supply, national security.
June 23, 2005: 5:16 PM EDT
NEW YORK (Reuters) - Political hurdles to Chinese oil company CNOOC Ltd. completing an audacious $18.5 billion bid to buy U.S. oil producer Unocal Corp. became increasingly evident Thursday, as some in Washington called for an exhaustive review that might scare away investors.
As the bid focused attention on the U.S.-China energy rivalry, Treasury Secretary John Snow told the Senate Finance Committee Thursday he expected the Chinese company to voluntarily ask for a U.S. government review of whether the deal threatens national security.
CNOOC's proposal came under attack from House Resources Committee Chairman Richard Pombo, who is asking the administration to get the Committee on Foreign Investments to investigate the matter immediately.
"The U.S. should be shoring up our reserves, not divesting them to global competitors seeking to fuel their own tremendous economic growth," Pombo, a California Republican, said in a statement.
On Wall Street, analysts and investors said the hot button status in Washington of both energy resources and Chinese trade and investment issues raised the risk of a long regulatory review scuttling the deal. That could overshadow the premium CNOOC is offering Unocal shareholders over Chevron Corp.'s (Research) roughly $16.4 billion offer, agreed to in principle in April.
Unocal (Research) investors may prefer the assurance of a quick completion of a takeover by Chevron, which is moving quickly to close the deal, said Duane Grubert, an analyst with Fulcrum Global Partners.
"Ultimately, Unocal has the motivation to prefer a Chevron bid, both in terms of timing and political pressures," said Grubert. "The Unocal bias right now should be to close the deal with certainty."
China, energy red flags in Washington
Acting Undersecretary of Commerce for Industry and Security, Peter Lichtenbaum, said it was unclear if U.S. shareholders would be inclined to accept the Chinese bid.
"I think it's premature to state any administration view of the (offer for Unocal) at this time," Lichtenbaum added, speaking to reporters after testifying to the U.S.-China Economic and Security Review Commission.
Chevron has sped up the timetable for closing its deal and has said it could do so as early as August. A CNOOC proposal, on the other hand, could take more than a year to be approved, one analyst said.
"It's possible, simply because we are dealing with a strategic resource," said emerging markets expert Mark Mobius, managing director of Templeton Asset Management, referring to political hurdles CNOOC could face in getting the deal cleared. "That's a difficult call."
Nevertheless, CNOOC Chairman Fu Chengyu earlier Thursday told Reuters he expected to win the takeover battle.
"Cash is cash. One hundred percent cash offers complete value certainty to Unocal shareholders, as opposed to Chevron's cash/stock offer," said Fu, an industry veteran who holds a master's degree in petroleum engineering from the University of Southern California.
If CNOOC does succeeds, it would be the biggest-ever overseas acquisition by a Chinese firm, reflecting China's broad energy strategy of buying overseas oil and gas reserves to feed its fast-growing economy for years.
To thwart that, Chevron could be forced to raise its offer to counter the CNOOC bid of $67 a share in cash, analysts say.
"As it stands, you've got a $67 cash offer that has uncertain approval, uncertain timing, and you have an offer worth maybe low 60s by Chevron," said Phil Davidson, fund manager at American Century Investments, which owned 2.3 million shares in Unocal on March 31.
"Chevron may be forced to come up with a little higher offer than they initially did," Davidson said. "I think it's Chevron's to lose because I think it would be a more certain deal to be approved."
On Tuesday, Exxon Mobil Corp. Chief Executive Lee Raymond told the Reuters Energy Summit it would be a mistake for the U.S. Congress to interfere with any potential bid by CNOOC. He said a move by the U.S. government to limit such a deal with a Chinese company could come back to haunt U.S. companies looking for business abroad.
Alan Greenspan Thursday warned lawmakers of the perils of restricting trade with China. Read more here.
In spite of soaring demand from China and India, Exxon's CEO believes oil prices will eventually fall. For more, click here.
LET'S BOYCOTT UNOCAL
Politicians discuss a possible deal's effects on oil supply, national security.
June 23, 2005: 5:16 PM EDT
NEW YORK (Reuters) - Political hurdles to Chinese oil company CNOOC Ltd. completing an audacious $18.5 billion bid to buy U.S. oil producer Unocal Corp. became increasingly evident Thursday, as some in Washington called for an exhaustive review that might scare away investors.
As the bid focused attention on the U.S.-China energy rivalry, Treasury Secretary John Snow told the Senate Finance Committee Thursday he expected the Chinese company to voluntarily ask for a U.S. government review of whether the deal threatens national security.
CNOOC's proposal came under attack from House Resources Committee Chairman Richard Pombo, who is asking the administration to get the Committee on Foreign Investments to investigate the matter immediately.
"The U.S. should be shoring up our reserves, not divesting them to global competitors seeking to fuel their own tremendous economic growth," Pombo, a California Republican, said in a statement.
On Wall Street, analysts and investors said the hot button status in Washington of both energy resources and Chinese trade and investment issues raised the risk of a long regulatory review scuttling the deal. That could overshadow the premium CNOOC is offering Unocal shareholders over Chevron Corp.'s (Research) roughly $16.4 billion offer, agreed to in principle in April.
Unocal (Research) investors may prefer the assurance of a quick completion of a takeover by Chevron, which is moving quickly to close the deal, said Duane Grubert, an analyst with Fulcrum Global Partners.
"Ultimately, Unocal has the motivation to prefer a Chevron bid, both in terms of timing and political pressures," said Grubert. "The Unocal bias right now should be to close the deal with certainty."
China, energy red flags in Washington
Acting Undersecretary of Commerce for Industry and Security, Peter Lichtenbaum, said it was unclear if U.S. shareholders would be inclined to accept the Chinese bid.
"I think it's premature to state any administration view of the (offer for Unocal) at this time," Lichtenbaum added, speaking to reporters after testifying to the U.S.-China Economic and Security Review Commission.
Chevron has sped up the timetable for closing its deal and has said it could do so as early as August. A CNOOC proposal, on the other hand, could take more than a year to be approved, one analyst said.
"It's possible, simply because we are dealing with a strategic resource," said emerging markets expert Mark Mobius, managing director of Templeton Asset Management, referring to political hurdles CNOOC could face in getting the deal cleared. "That's a difficult call."
Nevertheless, CNOOC Chairman Fu Chengyu earlier Thursday told Reuters he expected to win the takeover battle.
"Cash is cash. One hundred percent cash offers complete value certainty to Unocal shareholders, as opposed to Chevron's cash/stock offer," said Fu, an industry veteran who holds a master's degree in petroleum engineering from the University of Southern California.
If CNOOC does succeeds, it would be the biggest-ever overseas acquisition by a Chinese firm, reflecting China's broad energy strategy of buying overseas oil and gas reserves to feed its fast-growing economy for years.
To thwart that, Chevron could be forced to raise its offer to counter the CNOOC bid of $67 a share in cash, analysts say.
"As it stands, you've got a $67 cash offer that has uncertain approval, uncertain timing, and you have an offer worth maybe low 60s by Chevron," said Phil Davidson, fund manager at American Century Investments, which owned 2.3 million shares in Unocal on March 31.
"Chevron may be forced to come up with a little higher offer than they initially did," Davidson said. "I think it's Chevron's to lose because I think it would be a more certain deal to be approved."
On Tuesday, Exxon Mobil Corp. Chief Executive Lee Raymond told the Reuters Energy Summit it would be a mistake for the U.S. Congress to interfere with any potential bid by CNOOC. He said a move by the U.S. government to limit such a deal with a Chinese company could come back to haunt U.S. companies looking for business abroad.
Alan Greenspan Thursday warned lawmakers of the perils of restricting trade with China. Read more here.
In spite of soaring demand from China and India, Exxon's CEO believes oil prices will eventually fall. For more, click here.
LET'S BOYCOTT UNOCAL