The move of the China National Offshore Oil Company (CNOOC) Ltd. to bid for U.S. based-Unocal is pure business and benefits shareholders, said a spokesman for CNOOC Ltd. Thursday.

The spokesman, who refused to give his name, said that as a company listed both in Hong Kong and New York, any decisions made by CNOOC Ltd. are for the benefits of shareholders, including the one to bid for Unocal.

CNOOC Ltd. announced early last Thursday that it has proposed a merger with Unocal, a major U.S. oil company, offering 67 US dollars in cash per Unocal share, totaling 18.5 billion US dollars.

If successful, it would be the biggest-ever overseas acquisition for a Chinese company.

Established in Hong Kong in August 1999, CNOOC Ltd. was listed on the New York Stock Exchange and the Stock Exchange of Hong Kong Limited on February 27 and 28, 2001, respectively. The company was admitted as a constituent stock of the Hang Seng Index in July 2001.

In a letter sent to the Chairman of Unocal last Thursday, CNOOC Ltd. Chairman and Chief Executive Officer Fu Chengyu said that " this friendly, all-cash proposal is a superior offer for Unocal shareholders", and "I am confident that the merger will increase shareholder value."

Over the past week, CNOOC's shareholders happily saw a rising trend in their share value. On Tuesday, the share price of CNOOC Ltd. rose by seven percent to 4.6 Hong Kong dollars, the largest rising over the past one year.

However, there is concern as much as applause.

Through Chinese media, experts have expressed their worry that the deal may be blocked for political reasons.

"There are two factors affecting the results of the negotiation, " said Long Guoqiang, an expert from the Development and Research Center under the State Council.

"The first one is the market, which is favorable for CNOOC Ltd. because of the high bid price it has offered; however, the other one of policy may become the biggest obstacle in CNOOC's bid for the deal," said Long.

Seeming to be proof, a letter written and co-signed by two Texas Republicans to President George W. Bush was released Tuesday, said CNOOC's bid represents a "clear threat" to the energy and national security of the U.S..

Over the past week, Fu Chengyu, who got his master's degree in the U.S and speaks fluent English, has been engaged in various efforts to ease U.S. worries such as giving interviews to Western financial media.

In a letter to the U.S. Congress on Monday, Fu said CNOOC was eager to submit to regulatory review, "I want you to know that we encourage that review and welcome the opportunity to participate."

The deal is made in line with standard proceedings for international acquisitions, said the spokesman of CNOOC Ltd.

CNOOC Ltd. is advised by Goldman Sachs (Asia) L.L.C. and J.P. Morgan Securities (Asia Pacific) Ltd. N.M. Rothschild & Sons (Hong Kong) Limited also assisted the board's independent non-executive directors in their review of the transaction.

The financing for the acquisition bid is done in an international way and except for CNOOC Ltd.'s own cash resources of more than three billion US dollars, all the financing will be replaced by debt financing or equity treatment when the deal is done.

For the bid, CNOOC Ltd. will get bridge loans provided by Goldman Sachs and JP Morgan totaling three billion US dollars, which are expected to be replaced by permanent debt financing in the form of bonds at or shortly after completion, and bridge loans provided by the Industrial and Commercial Bank of China (ICBC) of six billion US dollars, expected to be replaced by permanent debt financing in the form of term loans.

The China National Offshore Oil Corporation, parent company and majority shareholder of CNOOC Ltd., will provide a long-term subordinated loan of 4.5 billion US dollars, expected to receive equity treatment for credit ratings purposes and a subordinated bridge loan of 2.5 billion US dollars, to be refinanced with equity within two years.

"CNOOC Ltd. turns over taxes and part of profits to the state, relieves the government of employment pressure by providing positions for thousands of people, and benefits from the government's reform and opening up policy. That's just the relationship between CNOOC Ltd. and the Chinese government. It's as simple as that between a U.S enterprise and the U.S. government, " said the spokesman.

The parent company, China National Offshore Oil Corporation, is China's largest offshore crude oil and natural gas producer, which holds 70.64 percent share of CNOOC Ltd.

Source: Xinhua