China National Offshore Oil Company Ltd. (CNOOC) announced yesterday that it has withdrawn its acquisition offer for Unocal Oil Company, putting an end to the 40-day bid for the American company that triggered a political storm in the US.
CNOOC said it had given active consideration to further improving the terms of its offer, and would have done so but for the American political environment.
"The unprecedented political opposition that followed the announcement of our proposed transaction ... was regrettable and unjustified," said the company.
A CNOOC spokesperson in Beijing told Xinhua News Agency last night that "political pressure" was one of the major reasons for the company to withdraw the offer.
CNOOC, a subsidiary of the state-owned China National Offshore Oil Corporation, announced on June 23 an all-cash bid for Unocal at US$67 per share, totaling US$18.5 billion.
The bid, however, met unexpected political opposition from the US political circle, where certain people had viewed the proposed merger as a threat to American security.
When the CNOOC offer was announced, some Chinese economists had expressed concern that the deal might be blocked for political reasons.
"There are two factors affecting the results of negotiations," said Long Guoqiang, an expert with the Development and Research Center of the State Council, China's cabinet.
"The first is the market, which is favorable for CNOOC because of the higher price it has offered. However, the other factor, or the policy factor, may become the biggest obstacle for the CNOOC bid," said Long.
In early July, the US House of Representatives voted 398-15 for a measure calling on President George W. Bush to review the bid, citing security threats including the possible transfer of military technology to China.
The board of Unocal announced in late July it would recommend a sweetened bid from Chevron to a special meeting of their shareholders scheduled for August 10.
Their preferred bid, a mixture of cash and share, stands at a little over US$17 billion, lower than that of CNOOC.
According to Unocal, as any purchase by CNOOC would have to be examined by the Bush administration, a process that could have taken months, Unocal had insisted CNOOC raise its offer to compensate for the risk of delays in seeking regulatory approval.
But CNOOC refused to put forward a new offer, saying it would not do so unless Unocal agreed to pay the costs of ending the Chevron deal and lobby for the deal in the US Congress.
The timing of the bid also worsened its political response in the US, said Mei Xinyu, a Ministry of Commerce researcher. "As a strategic energy resource, petroleum has seen its price rocket on the international market since last summer. To take over a foreign oil company at such a time would not only increase takeover costs, but also heighten worries in the country of the bought company.”
"It is still good experience for Chinese companies, many of which are adopting a so-called 'going-out' strategy and seeking global expansion," Mei added.
(Xinhua News Agency August 3, 2005)