CNOOC Ltd (
The Beijing-based company will offer about US$71.50 a share, 10 percent higher than a bid made by San Ramon, California-based Chevron on April 2, the people said, asking not to be identified.
The bid would be the world's second-largest cash offer for a company in at least six years, data compiled by Bloomberg show.
China needs overseas energy assets to help fuel its US$1.65 trillion annual economy, the world's fastest-growing major market. Paying with borrowed funds would cost state-controlled CNOOC about US$1.2 billion in yearly interest payments, the same as Unocal's net income last year.
The company may use some of its US$3 billion in cash and borrow the remainder from banks to finance the bid, the people said. CNOOC will seek approval for a bid from its eight-member board as soon as today, they said.
CNOOC's Chief Financial Officer Yang Hua (
In March, the company's independent directors delayed a vote on the issue and requested more information to address concerns an acquisition carried too much risk in terms of strategy and funding, they said.
Chevron is offering Unocal shareholders a combination of 0.7725 Chevron shares plus US$16.25, or 1.03 Chevron shares or US$65 in cash. The acquisition would boost its daily output by about 16 percent.
CNOOC needs to move quickly on its bid for Unocal because the US Securities and Exchange Commission is poised to approve the disclosure documents on Chevron's bid.
The Federal Trade Commission, the US antitrust regulator, approved Chevron's takeover plan on June 10.
The Chinese company's bid would have to be approved by US regulators amid concern about the control of Unocal's energy assets shifting to China.
Two Republican congressmen, Richard Pombo and Duncan Hunter, on June 17 wrote to US President George W. Bush seeking a review of any bid by CNOOC for Unocal on national-security concerns, the Asian Wall Street Journal reported yesterday.
"This is a politically sensitive issue here," said Michael Cuggino, who oversees US$360 million at Pacific Heights Asset Management LLC in San Francisco, including Chevron stock. "We're talking about oil and this, a time when there is a shortage of oil."
CNOOC indicated that it would finance the acquisition through bank debt and available cash, and attached proposal letters from potential financing sources, according to a May 26 filing made by Chevron to the US Securities and Exchange Commission.
"Something of that size would be difficult for the company to digest given its current balance sheet," said John Bailey, an analyst at Standard & Poor's in Hong Kong.
"It depends on exactly what they do and how they fund it. We're not privy to it at this stage," Bailey said.
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