-- China's third-largest oil producer made an unsolicited $18.5 billion bid Wednesday for oil-and-gas company Unocal Corp., which has already agreed to be acquired by Chevron Corp. for $16.6 billion.
Unocal acknowledged the offer from state-run CNOOC Ltd., an affiliate of China National Offshore Oil Corp., to buy the company for $67 a share in cash. Unocal, based in El Segundo, Calif., said it would evaluate the bid but that its board's previous recommendation to shareholders to accept the Chevron offer remained in place.
Chevron offered in April to acquire 115-year-old Unocal in a deal that offered Unocal shareholders a choice of accepting $65 a share cash, 1.03 shares of Chevron stock, or a combination of stock and cash.
The CNOOC offer, if successful, would be the biggest overseas acquisition yet for a Chinese company. It would be more than 10 times the size of Lenovo Group Ltd.'s $1.75 billion purchase of International Business Machine Corp.'s personal computer unit, which was completed in May.
In a written statement, CNOOC's chairman and chief executive, Fu Chengyu, called the bid "friendly" and said it would be superior for Unocal shareholders.
"The deal is fully financed, subject to customary closing conditions, and priced in line with market values for comparable businesses," Fu said. "We hope to be able to enter into a dialogue with Unocal soon and reach agreement on a consensual transaction."
CNOOC expects the acquisition to more than double its oil and gas production and increase its reserves by almost 80 percent, to approximately 4 billion barrels of oil equivalent.
The company also noted that both it and Unocal have a significant presence in Asia. CNOOC estimated that 85 percent of the combined reserves of both companies are located in Asia and the Caspian region.
China's rapid economic growth has turned the nation into the world's second-largest consumer of oil, after the United States. Its expanding energy needs have helped drive oil prices up by more than 50 percent in the past year.
CNOOC said that if the merger proceeds, the combined company "will have a leading position in the Asian energy market and an expanded role in the development of China's liquefied natural gas market."
Chevron, based in San Ramon, Calif., reaffirmed its bid Wednesday, saying its offer "combines compelling value, regulatory certainty and accelerated timing, providing a superior transaction for Unocal stockholders."
Chevron also noted that the merger agreement has been approved the Federal Trade Commission and the boards of both companies.
The FTC approved the Chevron-Unocal deal this month after Chevron promised not to enforce a patent on reformulated gasoline that the FTC said could have increased gas prices in California by more than half a billion dollars a year, or almost 6 cents a gallon.
The approval settled a two-year-old legal fight between Unocal and the FTC.
Chevron noted that a deal with CNOOC would require extensive new regulatory approvals in the United States and elsewhere.
Chevron said it expected Unocal shareholders to vote on its offer sometime in August.
CNOOC's chief financial officer, Yang Hua, said his company is "prepared to closely cooperate . . . to get U.S. approval for this deal," according to Dow Jones Newswires.
CNOOC said it plans to retain "substantially all employees, including those in the U.S," noting that Chevron plans layoffs.
The Chinese company said it planned to finance the transaction from its cash resources of more than $3 billion and loans from banks, including bridge loans from Goldman Sachs Group Inc. and J.P. Morgan Chase & Co., and its majority shareholder, state-owned China National Offshore Oil Corp.
Goldman Sachs and J.P. Morgan are advising CNOOC on the deal.
Shares of Unocal rose about 2 percent Tuesday on rumors that CNOOC was considering a bid. The stock rose 1 cent to close at $64.86 Wednesday on the New York Stock Exchange, then rose as much as 39 cents in after-hours trading.