CNOOC's 'punch drunk' offer

CNOOC's offer for Unocal – at Moneyweek.co.uk - the best of the week's international financial media.

China National Offshore Oil Corporation (CNOOC) yesterday tried to allay American politician and investor fears after the Chinese group bid $19.6bn for US rival Unocal. This is the third-largest cash offer in history, and is $1.5bn more than Chevron's offer made some two months ago. But CNOOC is picking up much criticism for its bid.

So what's the problem? Well, CNOOC's bid looks "punch-drunk", says Lex in the FT. The Chinese group's bid puts a $11.50 price tag on each proven barrel of oil equivalent nearly $1 more than Chevron offered to pay. This will "blow a big hole" in CNOOC's robust balance sheet...where it will go from a net cash position to gearing of nearly 70%. Yet CNOOC's own balance sheet is only part of the problem.

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