Singapore/Hong Kong, June 27 (Reuters): Executives from CNOOC and takeover target Unocal meet in New York this week and some fund managers say the $18.5-billion bid has a 50-50 chance of success, despite heavy political resistance in Washington.
CNOOC chief financial officer Yang Hua leads a group of officials from the state-run Chinese oil firm, along with advising lawyers and bankers, to the United States early this week to discuss the unsolicited bid it put to Unocal last week, a person familiar with the matter said on Monday.
CNOOC is trying to persuade Unocal’s board to recommend that shareholders accept its all-cash bid, representing a premium of around 9 per cent to oil major Chevron’s stock-and-cash offer.
“CNOOC gets a 50-50 chance of winning. Under the current climate, it’s not clear whether money or political concerns will get the upper hand,” said John Koh, fund manager at Daiwa Asset Management (Hong Kong) Ltd, which holds CNOOC shares.
Unocal would probably stick with Chevron’s offer unless CNOOC raised its bid or prove its acquisition will pass the US regulatory hurdles, sources said.
“The only way for CNOOC to get Unocal’s attention is that number one, they increase the price, and number two, they clear all the political hurdles in the US,” said a source close to the process.
“They need someone in the US government to come out and say: we’ll support this deal. Without that, you are not going to see any shareholders’ response to the bid,” he said.
To boost its chances, CNOOC has hired high-powered public relations manager Mark Palmer, the former chief spokesman of Enron Corp.
CNOOC is advised by US investment banks JP Morgan and Goldman Sachs as advisors. Spokespersons for the two investment banks declined to comment.
CNOOC’s offer, which will be China’s largest overseas acquisition if it materialises, has drawn fire from US politicians, who argue it would harm US national security.
More than 40 US lawmakers have urged the Bush administration to closely scrutinise CNOOC’s offer, amid discontent over China’s $160 billion trade surplus with the United States and concerns about China’s military might.
But some US corporate executives have said such concerns may be overblown given that most of Unocal’s reserves and output are in Asia and CNOOC has promised to sell US output locally.
