China oil firm makes $18.5bn bid for Unocal

State-owned CNOOC Ltd., China's third-biggest oil producer, launched an $18.5 billion bid for US oil company Unocal Corp., setting up a possible contest with rival bidder Chevron Corp.

The CNOOC bid Thursday was the biggest yet in a multibillion-dollar wave of foreign takeover attempts by Chinese companies trying to secure a place in the top ranks of global competitors.

Unocal, based in El Segundo, Calif., 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 Unocal in a deal that offered Unocal shareholders a choice of accepting $65 per share cash, 1.03 shares of Chevron stock or a combination of stock and cash.

CNOOC's chairman and CEO, Fu Chengyu, called his company's 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 in a statement. "We hope to be able to enter into a dialogue with Unocal soon and reach agreement on a consensual transaction."

The CNOOC purchase, if it is completed, would be China's largest overseas acquisition ever. The oil company joins a series of top state-owned Chinese companies that have made high-profile acquisition attempts abroad in recent years in an effort to establish a global presence.

Its bid came as Iowa-based appliance maker Maytag Corp. said it was considering a $1.28 billion buyout offer from China's Haier Group and two US private equity firms.

Chinese computer maker Lenovo Group Ltd. earlier bought IBM Corp.'s PC business for $1.75 billion.

CNOOC said its deal with Unocal would more than double its production and increase reserves by nearly 80 percent.

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 Sea region.

The company argued that the combination would result in a more balanced portfolio between natural gas and oil reserves, resulting in protection from price volatility in both commodities.

Chevron, based in San Ramon, Calif., reaffirmed its bid, 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 by the boards of both companies and has received regulatory approval.

The Federal Trade Commission approved the Chevron-Unocal deal in June 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 $500 million, 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.

CNOOC's chief financial officer, Yang Hua, told Dow Jones Newswires that his company is "prepared to closely cooperate to get US approval for this deal."

CNOOC said it plans to retain "substantially all employees, including those in the US," noting that Chevron, in contrast, plans layoffs.

"We believe the offer will be very good for America as we are going to protect US jobs while continuously marketing (Unocal's) products in the US," Yang said.

Chevron said it expected Unocal shareholders to vote on its offer sometime in August.