CNOOC Limited Proposes Merger With Unocal Offering Us$67 Per Unocal Share In Cash

abarrelfullabarrelfull wrote on 26 Feb 2013 09:07
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23 June 2005

CNOOC Limited (SEHK: 0883; NYSE: CEO) announces today that it has proposed a merger with Unocal Corporation ("Unocal"; NYSE: UCL) offering US$67 in cash per Unocal share. The offer values Unocal at approximately US$18.5 billion and represents a premium for Unocal‘s shareholders of approximately $1.5 billion over the value of Chevron Corporation‘s ("Chevron") offer based Chevron‘s closing price on NYSE on 21 June 2005.

In a letter sent to the Chairman of Unocal, CNOOC Limited Chairman and Chief Executive Officer, Mr. Fu Chengyu stressed that the approach is friendly and the company is seeking a consensual transaction with Unocal. This proposal is being submitted in accordance with the sale process initiated by Unocal.

CNOOC Limited believes that the combined company would have a leading position in the Asian energy market and an expanded role in the development of China‘s liquefied natural gas (LNG) market. The combination is expected to more than double CNOOC Limited‘s oil and gas production and increase its reserves by nearly 80% to approximately four billion barrels of oil equivalent. Approximately 70% of Unocal‘s current proved oil and gas reserves are in Asia and the Caspian region. It is expected that the merged company would also have an improved oil and gas balance, with total reserves of approximately 53% oil and 47% natural gas.

The transaction is expected to be EPS and cash flow per share accretive in the first full year after completion. CNOOC Limited anticipates that it will maintain a strong, investment-grade credit rating.

Mr. Fu Chengyu, CNOOC Limited Chairman and Chief Executive Officer, said: "This friendly, all-cash proposal is a superior offer for Unocal shareholders. The deal is fully financed, subject to customary closing conditions, and priced in line with market values for comparable businesses. We hope to be able to enter into a dialogue with Unocal soon and reach agreement on a consensual transaction."

"For our shareholders, there is a strong business rationale for the combination, as CNOOC Limited and Unocal would form one of the leading international E&P companies and become one of the premier players in the Asian energy market. It would rebalance our portfolio to include more natural gas reserves and strengthen our regional presence by combining with Unocal‘s complementary Asian asset base. I am confident that the merger will increase shareholder value."

Mr. Fu added, "We also expect this transaction to be accretive and that we will maintain a strong, investment-grade credit rating."

Commitments concerning Unocal‘s U.S. assets

CNOOC Limited is committed to fully integrating Unocal‘s strong management team and workforce into the combined company. The transaction will not adversely affect the U.S. oil and gas market since Unocal‘s U.S. oil and gas production will continue to be sold in the U.S. Unocal‘s U.S. oil and gas production accounts for less than 1% of total U.S. oil and gas consumption.
In connection with this offer, CNOOC Limited has provided the following assurances:

Commitments concerning Unocal‘s U.S. assets

CNOOC Limited is committed to fully integrating Unocal‘s strong management team and workforce into the combined company. The transaction will not adversely affect the U.S. oil and gas market since Unocal‘s U.S. oil and gas production will continue to be sold in the U.S. Unocal‘s U.S. oil and gas production accounts for less than 1% of total U.S. oil and gas consumption.

In connection with this offer, CNOOC Limited has provided the following assurances:

  • CNOOC Limited is willing to continue Unocal‘s practice of selling and marketing all or substantially all of the oil and gas produced from Unocal‘s U.S. properties in U.S. markets.
  • CNOOC Limited will seek to retain substantially all Unocal employees, including those in the U.S. This is in contrast to the existing Chevron proposal where Chevron has already announced plans to extract hundreds of millions of dollars of cost savings from the merger annually, including from employee layoffs.
  • CNOOC Limited hopes and will endeavor to persuade members of Unocal‘s executive and operational management to join the management team of the combined company.
  • CNOOC Limited will accept and agree to the terms of Unocal‘s recent FTC settlement relating to its patent rights in reformulated gasoline.
  • CNOOC Limited is confident that it will obtain Exon-Florio approval. To this end, CNOOC Limited is willing to divest or take other actions with respect to any of Unocal‘s non-E&P assets in North America to the extent such divestitures and actions would not give rise to a material adverse effect on Unocal, including considering special management arrangements for Unocal‘s U.S. non-controlling, minority pipeline interests and its storage assets.

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