Word: cnooc
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...piecing together what went wrong, there is plenty of blame to go around. At various times over the past three months, CNOOC, the Chinese government (which owns 70% of the company), and the company's gold-plated U.S. advisers?investment banks Goldman Sachs and JP Morgan, as well as high-powered Washington, D.C., law firm Akin Gump Strauss Hauer Feld LLP?all made bewildering, tone-deaf mistakes that hurt CNOOC's case. The oil company's Washington team, sources close to the deal say, consistently reassured management that the politics were manageable?even as the political climate deteriorated throughout...
...June 30 Congress, trying to gum up the regulatory process, overwhelmingly passed a resolution preventing the U.S. Treasury from spending any money to "approve" CNOOC's bid. In response, a Chinese Foreign Ministry spokesman?representing a government elected by no one?felt compelled to say publicly that Congress should butt out. Economic tensions with China were already front and center for many Congressmen, obsessed as they have been all year with China's surging trade surplus and a currency that was not revalued until July 21, and the Foreign Ministry did CNOOC no favors in Washington by weighing...
...Sometimes CNOOC's high-paid bankers were no more helpful than its Beltway advisers. Two principal lines of attack for Chevron's allies were that the CNOOC bid was effectively subsidized by sweetheart loans from the government, and that there was no "level playing field"?that is to say, a U.S. energy company could not acquire one of its competitors in China. Both points were, in fact, true. But earlier this summer leaks began appearing in the financial press?and word was spread around Washington?that there wasn't "one dime of [Chinese] government money" involved in the deal...
...Still, it took a while, one CNOOC board member says, for "reality to impinge." As late as three weeks ago, Fu and his bankers were still gung-ho, preparing to bid between $72 and $73 per share for Unocal?up from their initial $67 offer. Then, on July 19, came word that CNOOC's largest private shareholder, investment firm William Blair & Co. in Chicago, was dumping its entire stake in CNOOC?$141 million?fearful that Fu would overpay for Unocal. "We're not in favor of the bid," said David Merjan, a fund manager at the firm...
...That, says one source close to the CEO, "got Fu's attention, absolutely." For all the efforts of those opposed to CNOOC to portray it as part of a government monolith immune to commercial pressures, Fu and his managers have run one of the most transparent?and shareholder-friendly?companies in the new China. It stung when the largest private shareholder dumped its stake and publicly decried the possibility of a deal. Facts on the ground were piling up, and soon Fu began to prepare his retreat...