Unocal shareholders approve Chevron takeover

Unocal shareholders approve Chevron takeover




By Gary Gentile
ASSOCIATED PRESS

2:00 p.m. August 10, 2005

LOS ANGELES – Shareholders of oil and gas company Unocal Corp. formally voted Wednesday to accept a takeover bid by Chevron Corp., even as some at the meeting continued to lament a failed rival bid by a Chinese oil company.
The approval of the approximately $18 billion purchase of the world´s ninth-largest oil company follows months of negotiations and a high-profile courtship from CNOOC Ltd., a Chinese oil company that hoped to secure energy resources needed to accompany its country´s rapid economic growth.


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Unocal announced that holders of 77.2 percent of eligible shares favored the Chevron buyout and 2.6 percent were opposed. Of the shares actually voted, 96.6 percent approved the deal.

The two companies said the deal would be final by later in the day and its stock would be delisted after the close of business Wednesday.

Chevron said the acquisition would add to earnings in 2006. The combined companies will produce the equivalent of 2.8 million barrels of oil per day and the acquisition will increase Chevron´s reserves by about 15 percent, Chevron said in a press release.

CNOOC´s bid caused a political uproar, and was clearly on the minds of about 100 Unocal shareholders and employees gathered at a hotel for the final vote. Several expressed patriotic pride in Unocal being sold to a U.S. company, while some suggested the company may have sold too soon and wondered whether the Chinese company ever had a shot.

"Chevron is a fine company. They have a global perspective. They have comparable values," Unocal Chairman and CEO Chuck Williamson told the shareholders. "I hope you continue to support Chevron like you have Unocal."

After the meeting, Williamson lamented the political firestorm that erupted over the CNOOC bid and said both companies underestimated the opposition.

"We both recognized there would be political repercussions," Williamson said. "This touched a nerve. It really became a platform in my mind for much more complex and greater China-United States issues than just CNOOC and Unocal. That we did not anticipate."

Rick Somerville of Los Angeles, who said his family owns 20,000 shares, said Unocal may have benefited by waiting because of rising oil prices and Chinese demand for energy.

Williamson acknowledged that the price of oil rose more rapidly since the Chevron deal was first reached in April than he had anticipated. But he said that Unocal shareholders who opted to take Chevron stock will participate in the profits resulting from higher prices.

"That offer was open until the last day for anyone else who wanted to pay more in cash," Williamson said. "You´ll never time any acquisition or divestiture perfectly in this industry."

Somerville suggested that CNOOC may have been unfairly "locked out" due to political considerations, adding that while his family was extremely patriotic, "I´m also grateful to the Chinese because they made us a little more money."

Indeed, San Ramon, Calif.-based Chevron, the nation´s second-largest oil company, initially made a combination cash and stock offer of about $61 per share in April, but sweetened the deal only after CNOOC made its higher bid.

Chevron raised its buyout offer last month to $63 per share, and the value has risen in recent weeks along with Chevron´s stock price. Most Unocal shareholders chose to receive all cash in the deal.

In a joint news release, the companies said 241.9 million shares voted to receive $69 in cash for each of their Unocal shares, while 22.1 million elected to receive 1.03 shares of Chevron common stock for each Unocal share, and 10 million shares elected to receive a combination of stock and cash.

According to the terms of the merger agreement, the all-cash and all-stock elections will be prorated to preserve an overall per-share mix of 0.618 of a share of Chevron common stock and $27.60 in cash. Accordingly, those electing all cash will receive $30.13 in cash and 0.5803 of a share of Chevron common stock for each share of Unocal common stock.

El Segundo, Calif.-based Unocal, prized for its oil and natural gas supplies in Asia and the Gulf of Mexico, had initially been sought by three bidders, including an unidentified third foreign company.

CNOOC dropped its all-cash bid of $67 per share this month after U.S. politicians, noting that the company is 70 percent owned by China´s communist government, expressed concern that national security would be compromised. A flurry of legislation intended to derail the deal was introduced in both houses of Congress.

The controversy focused public attention on China´s growing appetite for foreign investments and the question of how U.S. corporations and lawmakers should respond.

Hoping to allay fears, CNOOC agreed to sell Unocal´s U.S. assets and promised to retain all of Unocal´s workers. CNOOC also argued that its bid was purely commercial and not connected in any way with the Chinese government.

That argument held little sway on Capitol Hill. Lawmakers fretted Unocal´s oil drilling might have military applications that could someday be used against the United States, and that CNOOC´s ownership structure helped it secure favorable financing terms unavailable to Chevron.

Despite the prospect of six months or more of uncertain regulatory haggling, Unocal´s board nearly approved the CNOOC offer until Chevron increased its bid. CNOOC had been willing to raise its all-cash bid even further, but Unocal balked at the conditions, which included Unocal publicly endorsing the CNOOC offer and shouldering the $500 million breakup fee that would be owed to Chevron.

Earlier this month, CNOOC withdrew its bid, citing "unprecedented political opposition."

"This political environment has made it very difficult for us to accurately assess our chance of success, creating a level of uncertainty that presents an unacceptable risk to our ability to secure this transaction," the company said.

The final sale made for some bittersweet sentiments at Wednesday´s Unocal shareholders meeting. One woman broke into tears as she spoke about the end of Unocal.

"I´m glad you went with Chevron. We´re very patriotic," said Lillian Auspitz of Las Vegas, who said she owned about 1,000 shares. "This is a very historic, sad day for us to see lovely Unocal go."