China's CNOOC discussing $13bn bid for Unocal
By Francesco Guerrera and Joseph Leahy in Hong Kong
Published: January 6 2005 14:17 | Last updated: January 6 2005 17:53
cnooc china national offshore oil company CNOOC, China's third-biggest oil and gas group, is considering a bid of more than US$13bn for its US rival Unocal in a deal that would mark the largest and most significant overseas acquisition by a Chinese company.
People close to the deal said the state-controlled group was interested in Unocal's Asian assets and had asked bankers to study a takeover of the whole company followed by a subsequent sale of the US assets.
People close to the negotiations warned the deal was at a very early stage and detailed talks had yet to take place. It is understood the Chinese group is also looking at other overseas targets.
CNOOC's plans are the latest sign of Beijing's determination to push its flagship commodity companies to acquire natural resources to fuel the country's rapid industrialisation and economic growth.
Chinese oil demand is expected to keep growing at or above forecast GDP growth of 8 percent this year, Zhang Xiaoqiang, vice chairman of China's National Development and Reform Commission said on Thursday.
They also underline the recent emergence of Chinese companies on the global merger and acquisitions stage withprivate and state firms attempting to exploit their domestic strengths to expand overseas.
Last month, the computer maker Lenovo bought IBM's personal computer business for US$1.75bn, while state-owned Minmetals offered about US$5bn in a failed attempt to buy Noranda, the Canadian mining giant.
An acquisition of California-based Unocal would represent a change in strategy for China's three oil majors - CNOOC, Sinopec and Petrochina - which have so far focused on buying oil fields and asset packages in developing countries.
Industry experts said buying the whole of Unocal, which is valued at about US$11bn and had net debt of US$2.4bn at the end of 2003, would be difficult for CNOOC, whose market value is about US$21.5bn and had cash resources of US$1.6bn at the end of 2003.
However, the Chinese company would be able to draw on financial help from its state-owned parent China National Oil Offshore Corporation and on the proceeds of any sale of Unocal's US assets.
Unocal's main attraction for CNOOC is its extensive operations in several Asian countries, including Indonesia, Thailand, Bangladesh and Burma.
However, a sale of Unocal's US assets to a rival party could prove problematic for CNOOC as the American company is burdened with legal disputes relating to the US' environmental Superfund legislation. The law requires companies to pay to clean up hazardous waste.
In addition, in Asia it reached an out-of-court settlement only last month in a landmark case alleging it was complicit in human rights abuses committed in Burma.
The deal would be likely to be attacked by interests in the US opposed to Chinese takeovers in important industries.
In 2003, Hutchison Whampoa, the Hong Kong-based conglomerate, was prevented from taking over bankrupt US telecoms company Global Crossing on national security grounds.
news.ft.com
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Looks like China smartly wants to get rid of its wasting US$ and put them to use in unloved energy assets.
Smart move
Mish |
