Unocal's shareholders to vote on Chevron offer

LOS ANGELES — Shareholders of oil and gas company Unocal Corp. will vote Aug. 10 on a proposed merger with Chevron Corp. valued at approximately $16.6 billion, even if Unocal's board subsequently accepts a rival bid from Chinese oil company CNOOC Ltd.

Unocal sent proxy materials to its shareholders of record as of Wednesday with a letter from chairman and chief executive Charles R. Williamson reiterating the board's unanimous recommendation to accept the Chevron bid.

The letter also noted the June 22 offer from CNOOC, valued at $18.5 billion, and said the board is in discussions with the company and would report to shareholders on the talks before the Aug. 10 meeting.

In a letter sent to Unocal employees Wednesday, Williamson said the company would "need to engage with CNOOC over the next few weeks concerning a number of issues in order to understand if it will be possible to reach a satisfactory agreement."

Williamson also said the company would continue to talk with Chevron about integrating the two companies even as it discusses a possible deal with CNOOC.

Chevron noted in a press release that the Securities and Exchange Commission had cleared Chevron's registration statement for the Unocal transaction, the last regulatory hurdle for the deal.

Chevron's offer gives Unocal shareholders a choice between cash and stock or all cash.

"The successful completion of U.S. regulatory requirements demonstrates that our transaction can be brought to a quick and successful conclusion," David J. O'Reilly, Chevron's chairman and chief executive officer, said Wednesday.

Since CNOOC made its all-cash bid last week, Chevron has emphasized that its offer was superior because it had already cleared regulatory reviews. The CNOOC bid, by contrast, could take six months or more to be reviewed by U.S. and overseas agencies.

Chevron has also said it would bring its offer to a shareholder vote as required in the merger agreement even if Unocal should accept the higher CNOOC offer. The agreement also calls for Unocal to make a $500 million cash payment to Chevron if Unocal accepts another offer.

"We remain confident in both the superiority of our offer and the chances for its success," CNOOC said Wednesday in a statement.

In his letter to Unocal workers, Williamson acknowledged that the next few weeks would be a "period of high anxiety and uncertainty, a time when you are wondering what the future will bring and a time when we can easily become distracted."

He also noted that the CNOOC bid had become a major international news event because of its implications for U.S. foreign policy.

"As we move forward, we will see and hear additional stories in the media speculating about developments and possible outcomes," Williamson wrote. "Pundits will make predictions and politicians will stake out their positions."

The latest proxy statement filed Wednesday also reveals that CNOOC first expressed its interest in acquiring Unocal last December, before Chevron approached. In previous filings, Unocal had referred to CNOOC only as "a non-U.S. industry participant."