Unocal Accepts Revised Chevron Takeover Bid

By Ben White
Washington Post Staff Writer
Wednesday, July 20, 2005; 11:36 AM

NEW YORK, July 20 -- Unocal Corp. late Tuesday said it has accepted a sweetened takeover offer from Chevron Corp., dealing a setback to the politically sensitive unsolicited bid for Unocal from Chinese oil company Cnooc Ltd.

In a move long anticipated by Unocal shareholders, Chevron on Tuesday raised its bid for Unocal to $63.01 per share, or about $17 billion. Chevron initially offered about $16.5 billion.

"Our increased offer has been driven by competitive circumstances, but even at this higher price it remains a compelling transaction for Chevron stockholders and is accretive to both cash flow and earnings per share in 2006," said Chevron Chairman and Chief Executive David J. O'Reilly in a prepared statement. "We are pleased to have the continued support of the Unocal board of directors and look forward to closing the transaction in just three weeks."

Chevron's offer for Unocal is still below Cnooc's current all-cash $18.5 billion bid. But Cnooc has run into strong opposition in Washington from members of Congress who say selling a U.S. oil company to a Chinese firm could threaten national security. Cnooc is 70 percent owned by the Chinese government.

Unocal said in a statement late Tuesday that its board had accepted Chevron's sweetened bid, which includes a mix of 40 percent cash and 60 percent Chevron stock, up from 25 percent cash in the original offer. Unocal recommended in the statement that shareholders approve the amended offer when it comes up for a vote on Aug. 10.

A Cnooc spokesman in New York could not be reached for comment Wednesday morning. Cnooc management has authority from the company's board to raise its bid as high as $69 per share. But it is unclear if even that would be enough to sway Unocal directors who are concerned that political pressure could make it difficult to close a deal with Cnooc. A spokesman for Cnooc Ltd. in Beijing declined to say whether initial reports that Chevron had upped it bid would lead the Chinese company to follow suit.

One large Unocal shareholder on Wednesday said he did not believe Chevron's increased bid would be enough to knock out Cnooc, especially if political opposition to the Chinese company's bid cools as Washington turns its attention to President Bush's Supreme Court nominee, John G. Roberts Jr.

The shareholder, who would benefit from a bidding war for Unocal, asked not to be identified by name because his firm does not discuss its holdings.

"They've certainly improved it," the shareholder said of Chevron's bid. "But I don't think it's over yet. I think it all depends on what happens in the next week or two in Washington."

Chevron's increased bid came the same day that Chinese appliance maker Haier Group Ltd. dropped its bid for Maytag Corp., another factor that could lessen anxiety over Chinese attempts to snap up well-known U.S. companies.

Peter S. Goodman contributed to this report from Shanghai.

© 2005 The Washington Post Company