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CNOOC shareholders veto takeover proposal
By Kelvin Wong and Michele Batchelor (China Daily)
Updated: 2006-01-04 06:33
Shareholders of CNOOC, China's third-largest oil company, have blocked a
proposal for the State-owned parent to lead overseas acquisitions, defending
their influence over the group's expansion strategy.
The plan to end the publicly traded unit's priority right to takeovers was
opposed by 59 per cent of independent shareholders at a December 31 meeting in
Hong Kong, the company said in a statement on Monday. Chief Financial Officer
Yang Hua had argued in September that the plan would ease concern among
investors that some opportunities are too risky or expensive.
Shareholder rights activist David Webb campaigned for investors to defend
their right to profit from all the company's overseas projects as set out under
the terms of CNOOC's 2001 initial public offering. China has sought to meet
increased oil demand by buying fields in countries including Kazakhstan,
Indonesia and the Sudan.
"I can see David Webb's perspective, but on the other hand the outcome will
make it very difficult to acquire oil and gas deals overseas," said Fooy Choy
Peng, the Hong Kong-based assistant director of China research at UOB-Kay Hian
Ltd. "For some of these deals, government contacts are very important."
CNOOC last year withdrew an US$18.5 billion bid for Unocal Corp, citing
opposition from US lawmakers.
Freeing the parent, China National Offshore Oil Corp, from the restrictions
would reduce opportunities for the Hong Kong-traded unit, shareholder activist
Webb said last month.
Under the December 31 proposal that was rejected by minorities, the parent
company would have to get the approval of the unit's board for any overseas
acquisition.
"It is far too important to delegate the approval process to a board which is
controlled by the parent," Webb said in an interview yesterday. Webb, a director
of the Hong Kong stock exchange and publisher of Webb-site.com, said he owns a
"token" 50 CNOOC shares.
China's government-run oil companies have been competing for overseas
reserves as the nation's demand has more than doubled in a decade.
CNOOC's shareholders have benefited from the parent's undertaking when the
company went public in Hong Kong in 2001 to offer all takeover opportunities to
the listed company first, Webb said.
"It would be acceptable if the parent company wishes to be released from the
non-compete clause on an individual project where minority shareholders have to
approve that," he said. "This makes the group structure cleaner."
Having the parent lead acquisitions would allow the group to take advantage
of the government's relations with other countries to reduce political
opposition, Chief Financial Officer Yang said.
He said CNOOC's parent could pursue projects that investors might feel were
too risky or expensive, and then offer them to the publicly traded company at a
later date.
"The company needs to come up with more detailed explanations regarding why
they wanted to go through with this," said Belle Liang, head of China research
at Core Pacific-Yamaichi International in Hong Kong.
(China Daily 01/04/2006 page9)
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