China Bids For U.S. Oil Company

AP Image Ingested via Automated Feed
China's third-largest oil producer made an unsolicited $18.5 billion bid Thursday for U.S. oil company Unocal Corp., marking the communist nation's most ambitious attempt yet to acquire a Western company and setting the stage for a possible showdown with U.S. politicians concerned about potential national security issues.

The purchase by state-owned CNOOC Ltd., if completed, would be the biggest yet in a multibillion-dollar wave of foreign acquisitions by Chinese firms trying to secure a place in the top ranks of the corporate world.

It comes amid a flurry of Chinese government efforts to secure foreign energy supplies for the country's booming economy.

Unocal already had agreed to be acquired by Chevron for a lower price of $16.6 billion, but said it would evaluate the CNOOC offer. Unocal said its board's earlier recommendation to shareholders to accept the Chevron offer remained in place.

Chevron offered in April to acquire El Segundo, Calif.-based Unocal in a deal that would give Unocal shareholders a choice of $65 per share in cash or Chevron stock or a mix of stock and cash.

A CNOOC takeover of Unocal would require approval from a U.S. government panel that examines the national security implications of selling American companies to foreigners, according to U.S. Energy Secretary Samuel Bodman.

It could face opposition in Washington, where even before CNOOC made its bid, two members of Congress appealed to President Bush last week to review the deal for possible security threats.

CNOOC Chairman and CEO Fu Chengyu insisted Thursday that national security wasn't an issue.

"This transaction is purely a commercial transaction," he said in a conference call with reporters. "We are confident that the U.S. government will support this project."

Fu called the bid friendly and said it would be superior for Unocal shareholders.