China withdraws Unocal bid

SAN FRANCISCO — China's government-controlled CNOOC Ltd. withdrew its $18.4 billion bid for Unocal Corp. on Tuesday, ending a politically charged takeover battle that highlighted the United States' growing apprehension about the economic rise of the world's most populous country.

CNOOC's retreat clears the way for Chevron Corp., the second-largest U.S. oil company, to complete its acquisition of Unocal next week, even though its cash-and-stock offer is currently worth $700 million less.

Chevron had several factors working in its favor — regulatory clearance, the support of Unocal's board and the backing of U.S. lawmakers, who questioned whether economic and national security interests would be threatened if a company with significant ties to China's Communist government were to buy a major U.S. oil company.

Those misgivings virtually ensured CNOOC's bid would have to undergo a rigorous — and possibly tempestuous — review that would have prevented Unocal from being sold for at least another six to nine months, with no guarantee that the deal would ever be completed.

In a strongly worded statement, Hong Kong-based CNOOC said it might have raised its bid even higher, if not for the political backlash.

"The unprecedented political opposition . . . was regrettable and unjustified," CNOOC said. "This political environment has made it very difficult for us to accurately assess our chance of success, creating a level of uncertainty that presents an unacceptable risk to our ability to secure this transaction."

Chevron spokesman Don Campbell declined to comment on CNOOC's remarks, saying the company is focused on assuring a smooth transition after its Unocal acquisition is complete.

The marriage is expected to be consummated Aug. 10 when Unocal shareholders are scheduled to formally vote on the offer. CNOOC's withdrawal from the bidding is anticipated to turn the vote into a formality.

Unocal spokesman Barry Lane said the company's board remains convinced that it accepted the superior offer.

Oppenheimer & Co. analyst Fadel Gheit agreed with Unocal's rationale, given the uncertainties surrounding CNOOC's bid. But he doubted a bid from another foreign oil company would have met such stiff opposition.

"If (Netherlands-based) Royal Dutch Shell had come up with an offer $2 per share higher, then Chevron wouldn't be getting Unocal," Gheit said. "Let's face it: We are treating the Chinese completely different from most other countries."