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China's CNOOC defends bid for Unocal

Posted on: Saturday, 2 July 2005, 16:58 CDT

BEIJING (Reuters) - China's CNOOC Ltd. <0883.HK> said onSaturday its request to the U.S. government to review its planto merge with oil and gas producer Unocal Corp. wasvoluntary and aimed at clearing up doubts about the deal.

CNOOC has asked the Committee on Foreign Investments in theUnited States (CFIUS) to review its $18.5 billion bid, whichtopped a $16 billion-plus cash and stock offer from San Ramon,California-based Chevron Corp. .

"It's a voluntary notice from CNOOC Ltd. We hope the reviewwill be put onto formal proceedings of CFIUS as soon aspossible as we are sure that the transaction is purecommercial," China's official Xinhua news agency quoted a CNOOCspokesman as saying.

CNOOC's bid for Unocal, whose headquarters in El Segundo,California, has become a complicating factor in the diplomaticjostling between China and the United States over currency andtrade issues.

It also comes at a sensitive time when oil is trading nearrecord highs, and both countries are intent on securing energyresources.

CFIUS, an interagency committee, considers proposedacquisitions of U.S. corporations by foreigners where nationalsecurity might be a concern.

"This filing gives CNOOC the opportunity to comply with allU.S. rules and regulations in an open and transparent manner,and to fully discuss our proposal," Xinhua quoted Yang Hua,CNOOC's chief financial officer, as saying.

"We welcome this opportunity and believe that once all thefacts are known and the commercial purpose and terms of thetransaction are fully understood, many initial misimpressionswill be corrected, and many doubts and questions will befavorably resolved," Yang said. He did not elaborate.

The U.S. House of Representatives voted overwhelmingly onThursday to add an amendment to an appropriations bill thatwould bar the Treasury Department from spending any money torecommend approval of the CNOOC bid for Unocal. If signed intolaw, the measure would not take effect until Oct. 1.

The House also passed a non-binding resolution calling onPresident Bush to request an immediate review of the deal.

U.S. Representative Joe Barton, chairman of the HouseEnergy and Commerce Committee and co-sponsor of the resolution,called for a hearing on the CNOOC bid. Barton, a TexasRepublican, described CNOOC as "a front company for theCommunist Chinese government."

CNOOC, whose largest shareholder is the Chinese government,made the request for the U.S. government review before the twoHouse votes.

CFIUS will not begin its work until it has received what itcalls a complete notification. If the panel accepts theapplication for review, it has 30 days to decide whether tolaunch a full investigation.

Given that the CNOOC offer is more attractive financially,many investors have said the only real hurdle is politicalopposition that could slow down the acquisition. Chevron'soffer already has all the necessary regulatory approvals.

Unocal shareholders are set to vote Aug. 10 on the offerfrom Chevron. Until then, Chevron says, CNOOC and Unocal cannotsign a deal unless Chevron is paid a $500 million break-up fee.

Source: REUTERS

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