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Unocal meets again to weigh CNOOC bid

U.S. oil producer Unocal Corp. held a second board meeting to discuss a fine-tuned $18.5 billion bid from state-run Chinese firm CNOOC Ltd., people familiar with the matter said on Monday.
/ Source: Reuters

U.S. oil producer Unocal Corp. held a second board meeting to discuss a fine-tuned $18.5 billion bid from state-run Chinese firm CNOOC Ltd., people familiar with the matter said on Monday.

The board, meeting in California Sunday night, discussed whether to back the CNOOC offer or stick with an earlier accepted $16 billion-plus bid from global major Chevron Corp., the sources told Reuters. So far, Unocal has not notified CNOOC about its stance on the Chinese bid, they said.

Expectations of a bidding war have risen, pushing up Unocal shares about 10 percent past Chevron’s $60 a share offer to near CNOOC’s $67 a share offer. CNOOC shares fell 1.6 percent on Monday, the third day of losses, on fears it could raise its bid further and cut into any value from the acquisition.

Peter Schoenfeld, chief executive officer of New York-based investment firm PSAM LLC, which holds one million Unocal shares, said CNOOC may need to raise its bid to win Unocal’s support.

“We feel CNOOC would be well advised to put an improved or best bid on the table now,” Schoenfeld told Reuters. “At this point CNOOC is not purely bidding against Chevron, but to gain support of the board of Unocal to forego their ’bird in hand.”’

Unocal’s board met on Thursday to weigh the CNOOC offer, which it received last week.

Chevron, the number 2 U.S. oil company, has stood by its deal signed in April, though some analysts and investors expect it to raise its bid as a crucial vote on the deal by Unocal shareholders on Aug. 10 draws near.

Unocal had not chosen the CNOOC offer partly because of concerns that U.S. regulators may not approve the deal.

U.S. political opposition to the Chinese offer is growing as some believe a sale of Unocal, which has assets stretching from Myanmar to the Gulf of Mexico, to a Beijing-controlled firm would harm U.S. national energy security.

Lawmakers and Chevron also say it is hard for Chevron to compete with CNOOC on financing terms. CNOOC’s bid is financed with low and zero-interest loans from state entities.

CNOOC has fine-tuned its bid to provide more assurances for Unocal. CNOOC is setting aside $2.5 billion in an escrow account in the United States that would be paid to Unocal shareholders if the Chinese firm walked away from the deal.

But CNOOC will not owe any money if the U.S. government blocks the deal, as long as it meets all conditions set in its contract to address U.S. security concerns.

CNOOC is also putting an additional $500 million in escrow, which will be used to pay Chevron as a break-up fee if Unocal accepts the Chinese bid.