CNOOC to launch US$18.5b bid for Unocal
(Xinhua)
Updated: 2005-06-23 10:01

China National Offshore Oil Corporation (CNOOC) Ltd., China's largest offshore oil and gas producer, announced early Thursday it has proposed a merger with Unocal Corporation, offering US$67 in cash per Unocal share.

The offer values Unocal at about US$18.5 billion, representing a premium for Unocal's shareholders of about US$1.5 billion over the value of Chevron Corporation's offer based its closing price on New York Stock Exchange (NYSE) on Wednesday, said CNOOC Ltd.

If successful, it would be the biggest-ever overseas acquisition for a Chinese company.

In a letter sent to the Chairman of Unocal, CNOOC Ltd. Chairmanand Chief Executive Officer Fu Chengyu described the approach as "friendly", saying that the company is seeking a consensual transaction with Unocal. This proposal is being submitted in accordance with the sale proceedings initiated by Unocal.

The California-based Chevron announced on April 4 that it has got the acquisition agreement from Unocal with its cash and stock offer.

However, in a message offered to the Hong Kong Stock Exchange on June 7, CNOOC Ltd. said that it was continuing to examine its options with respect to Unocal, including a possible offer for Unocal.

The combined company would have a leading position in the Asianenergy market and an expanded role in the development of China's liquefied natural gas (LNG) market, said Fu.

According to CNOOC Ltd., the combination is expected to more than double CNOOC oil and gas production and to increase its reserves by nearly 80 percent to about 4 billion barrels of oil equivalent.

Approximately 70 percent of Unocal's current proved oil and gasreserves are in Asia and the Caspian region. It is expected that the merged company would also have an improved oil and gas balance,with total reserves of approximately 53 percent oil and 47 percentnatural gas.

CNOOC said it would borrow 16 billion US dollars from its parent company and banks to finance the offer. It secured bridgingloans totaling 3 billion US dollars from Goldman Sachs Group Inc. and JP Morgan Chase & Co. and 6 billion US dollars from Industrialand Commercial Bank of China. CNOOC will borrow 7 billion US dollars from its parent, China National Offshore Oil Corp.

If successful, CNOOC would assume net debt from Unocal and haveto pay a 500 million US dollars break up fee to Chevron.

Established in Hong Kong in August 1999, CNOOC was listed on the New York Stock Exchange and the Stock Exchange of Hong Kong Limited in 2001 respectively and was admitted as a constituent stock of the Hang Seng Index in July 2001.

As China's third largest oil and gas producer, the CNOOC Group mainly engages in offshore oil and natural gas exploration, development, production and sales.

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