Losers (in order - and even Chevron may turn out to be a loser):
- Unocal Shareholder: no more explanation needed
- Unocal employees: some jobs are going to be eliminated
- US as a country, its people, and "free market": The Economist said, "By sabotaging a Chinese bid, America has damaged its own interests...The anti-China hysteria in Washington, DC, the cowardly silence of the pro-China business lobby and the blatant disregard for fair play and open markets is deeply disturbing. A second-rank oil firm such as Unocal is not worth such a sacrifice of principles. Blocking CNOOC has not meaningfully increased America's energy security. But it may have damaged American business interests, in China and elsewhere. How could America now credibly complain about, say, French attempts to prevent PepsiCo taking over Danone? Beijing will no doubt use this incident to deflect American pressure to pursue reform in other areas. American politicians, so fond of seizing the moral high ground, have ceded it to, of all people, the Chinese."
- USD as a currency: Brad Sester said "Yesterday, it became 100% clear that the dollar is not freely convertible into [equity of] US companies." US gets what it wants, a devaluation in USD, and it is not just in terms of value. I suppose "The Economist" might call it a "degradation of USD". Without the exchange devaluation it so desperately seeks, it sabotaged its own currency hegemony status.
- You can even argue Chevron may turn out to be the loser, if oil price drops. As it is not a zero sum game between Chevron and Unocal in this case - Chevron is going to get $500M sure money if CNOOC won!
- plus - won international sympathy, can use this to better its trade negotiation position with US
- Plus - wisely maintained a low profile after CNOOC quitted: WSJ Aug 5 said "China Restricts News of CNOOC Bid -- China is heavily restricting domestic news coverage of CNOOC Ltd.'s failed bid to buy American oil company Unocal Corp., a move apparently aimed at muffling criticism of the U.S. before next month's summit meeting between Chinese President Hu Jintao and President Bush..."
- minus - PBC will still be limited in its option to invest with its USD stash
- plus - further diversifying on EUR might not be a bad thing
Other corporations in China (e.g. Haier, Yunnan Tobacco, SAIC, Wanxiang) :
- plus - smoother deal for acquiring "non-strategic" asset, thanks to sympathy CNOOC won for them
- minus - expect opposition from China paranoia (see below) for future deal, if it is marginally 'strategic'
- minus - wasted some time and resource of this deal (but shared 50% of the blame for its inexperience in dealing with non-executive directors, and how to manage a public company -- plus = now learned)
- plus - Unocal was viewed as over-priced by the market, as reflected by its share value gain after its called off the bidding
- plus - gain some experiences, and wide sympathy
- plus - Chevron might yield higher share to CNOOC in the Australian deal
WSJ Editorial Aug/3 pp A10: China Paranoia
- "The Red-scare protectionists on Capitol Hill won a victory of sorts yesterday when the Chinese-owned oil company, CNOOC Ltd., withdrew its offer to purchase Unocal for $18.4 billion. But at whose expense? We suspect the big losers are not so much the Chinese but rather Unocal shareholders, who will have to take a lower price for their shares.
Cnooc's offer was about $1 billion higher than what American-owned Chevron Corp. has put on the table. Had it not been for six weeks of congressional jaw-boning against the Cnooc offer, there's a strong likelihood a bidding war with Chevron might have prompted Cnooc to raise the price further.
This awkward affair follows on the Bush Administration's misguided demands that China revalue the yuan and the tariff measures directed at Chinese imports introduced in both Houses of Congress. So we now have a fissure in U.S.-China relations at a time when $250 billion a year in two-way trade flows are unambiguously enriching both nations.
The mystery is why the Washington celebration over Cnooc's stand- down. To be sure, China is a nation with inexcusably suppressed political freedom and way too much state intrusion in the economy. We too were troubled that Cnooc is quasi-state owned. But it is a good thing for Americans if the Chinese use their increasing economic clout and the dollars they accumulate from trade to bid up the value of U.S. assets.
And since there is one global price for oil, whether Unocal's resources are owned by a Chinese or American firm has no bearing on the price Americans pay for gas. China, like the U.S., is a major importer of oil; Cnooc would have had every incentive to pump oil to keep it on the market.
A zero-sum neurosis has taken hold on Capitol Hill that the Chinese, with their double-digit rates of economic growth, are creating too much wealth and that all this wealth is coming at America's expense. The real lesson of China's economic miracle of the past decade is that capitalism works. The lesson of the failed Cnooc deal with Unocal is that there are still too many mercantilists in Washington."
FEER/IIE: No Reason to Block the Deal