Chinese company will make decision soon about takeover of U.S. company

The board of the Chinese National Offshore Oil Co. is planning to decide early this week whether to raise its bid for U.S.-based Unocal or abandon its takeover effort, executives close to the company said over the weekend.

Several members of CNOOC's board and management have expressed doubts in recent days about the wisdom of continuing to pursue the bid in the face of mounting opposition in Washington, but it remained unclear Sunday which way the board would vote.

If CNOOC does decide to raise its bid, the company and its advisers have determined that to win approval from Unocal's board, the bid would have to go to about $72 a share, from the current $67 a share.

Unocal has already accepted an offer from Chevron worth about $17 billion, or $64 a share, dismissing CNOOC's higher offer as too politically risky.

Unocal and CNOOC were close to an agreement earlier this month, according to filings made last week by Unocal. Unocal's board was willing to accept the "considerably greater" risk of CNOOC's offer compared with Chevron's bid if CNOOC raised its offer, according to the filings. Talks broke down when CNOOC refused to raise its bid further and Chevron came up with an offer that was larger than its first proposal, originally valued at $16.8 billion.

The timing of CNOOC's decision is being driven, in part, by a vote by Unocal's shareholders scheduled for Aug. 10. If Chevron adjusts its bid anytime after Thursday, then that date would change. CNOOC could raise its offer and play a high-stakes game of brinkmanship, forcing Chevron to change its bid and resetting the clock on a vote.

But CNOOC is sensitive about raising its bid beyond $70 because it worries that such a high offer would give more ammunition to politicians in Washington who say its efforts are being driven by national interests and not by economics.

For more than a month, the fate of Unocal has been a focal point of trade relations between the United States and China. CNOOC's proposal to buy an American company with roots dating to 1890 is part of China's increasingly visible efforts to build global oil and gas companies and compete with other oil importers, including the United States, to secure its energy supplies.