Posted on 06/26/2005 8:09:18 PM PDT by CHARLITE
Boston - Some analysts and money managers here would pick Chevron Corp to beat CNOOC Ltd in the emerging race to acquire Unocal Corp, though they hope US politics won't be the deciding factor. CNOOC, China's biggest offshore oil company, has formally bid $18.5bn for Unocal.
That's about $1.5bn higher than the proposal by Chevron, which in April announced a pact it had hoped to seal within the next several weeks.
"I think Chevron's going to win because I think there will be some economic consequence to the regulatory hurdles that CNOOC has to do," money manager Mike Holland said.
Holland, whose firm oversees more than $5bn and owns Chevron shares, said one thing he doesn't want to see is CNOOC's bid's scuttled by Washington politicians who erect barriers to free trade.
"That would be a very short-sighted thing for us, hugely short-sighted," Holland said. "I don't look to Congress particularly to be a defender of Chevron's bid."
Michael Cuggino, president and portfolio manager at Permanent Portfolio Family of Funds, whose assets total about $370m, also picked Chevron as the likely winner.
CNOOC, which is controlled by the government of China, would expose Unocal shareholders to too much political risk, he said.
"There's not enough transparency in China right now - property rights are not as developed," Cuggino said.
The China risk aside, CNOOC's bid would also face a "regulatory battle" in the US, he said.
While Cuggino would like the US government to stay out of the process, "the reality is oil is in short supply around the world right now, Unocal is a United States company and we're not talking about $20 oil, we're talking about $60 oil," he said.
Randall Grace, an analyst at Chilton Capital Management, said Chevron may not have to better CNOOC's bid to get Unocal.
"The China bid faces political pressure from Congress, it's unfriendly and unsolicited," Grace said, adding that he believes the stock portion of Chevron's bid would be non-taxable.
The China bid is cash only at $67 a share.
Acquiring Unocal would give Chevron increased access to resources in one of the world's fastest growing areas, the analyst said.
"It (would give) them a dominant pan-Asian production footprint from Azerbaijan and Kazakhstan in the Caspian Sea to Indonesia, Thailand and the Pacific Rim," Grace said.
We don't let our own government buy businesses, how can we let foreign governments buy them?
I believe Chevron is looking at raising their offer.
CNOOC is half the size of UNOCAL. UNOCAL is financially healthy. In theory UNOCAL could make a bid for CNOOC. That won't happen, but maybe it should. It would be interesting to see the Chinese reaction. It would illustrate that the Chinese company is not purely a commercial entitity. It is partly an instrument of Chinese foreign policy, which is why it would actually be appropriate for our government to block them from buying UNOCAL.
i somehow think china can exceed any offer made by Chevron...
>>> CNOOC, which is controlled by the government of China, would expose Unocal shareholders to too much political risk, he said. <<<
I don't understand. Unocal shareholders would receive all cash from CNOOC for their shares & then would have no ownership in Unocal. Maybe Mike meant Unocal employees.
Isn't there a national security issue at stake here-- how do we let a hostile nation get a major foothold in our most precious resource?
I'm pretty free-market, hell I'm a Libertarian, but this seems like something the Fed should say 'no' to. Am I wrong here?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.