The approval of the approximately $18 billion purchase of the world's ninth-largest oil company follows months of negotiations and a high-profile courtship from CNOOC Ltd. (CEO), a Chinese oil company that hoped to secure energy resources needed to accompany its country's rapid economic growth. Its bid caused a political uproar.
Wednesday's vote is actually a return to the first bidder for El Segundo, Calif.-based Unocal, which is prized for its oil and natural gas supplies in Asia and the Gulf of Mexico.
San Ramon, Calif.-based Chevron, the nation's second-largest oil company, made an initial combination cash and stock offer of about $61 per share in April, after CNOOC expressed interest but before it bid. Chevron sweetened its buyout offer last month to $63 per share, and the value has risen in recent weeks along with Chevron's stock price. Most Unocal shareholders chose to receive all cash in the deal.
In a joint news release Wednesday, the companies said 241.9 million shares voted to receive $69 in cash for each of their Unocal shares, while 22.1 million elected to receive 1.03 shares of Chevron common stock for each Unocal share, and 10 million shares elected to receive a combination of stock and cash.
According to the terms of the merger agreement, the all-cash and all-stock elections will be prorated to preserve an overall per-share mix of 0.618 of a share of Chevron common stock and $27.60 in cash. Accordingly, those electing all cash will receive $30.13 in cash and 0.5803 of a share of Chevron common stock for each share of Unocal common stock.
The vote count will be finalized by Aug. 17, the companies said in the release.
CNOOC dropped its all-cash bid of $67 per share this month after U.S. politicians, noting that the company is 70 percent owned by China's Communist government, expressed concern that national security would be compromised. A flurry of legislation intended to derail the deal was introduced in both houses of Congress.
The controversy focused public attention on China's growing appetite for foreign investments and the question of how U.S. corporations and lawmakers should respond.
Hoping to allay fears, CNOOC agreed to sell Unocal's U.S. assets and promised to retain all of Unocal's workers — something that Chevron is unlikely to do. CNOOC also argued that its bid was purely commercial and not connected in any way with the Chinese government.
That argument held little sway on Capitol Hill. Lawmakers fretted Unocal's oil drilling might have military applications that could someday be used against the United States, and that CNOOC's ownership structure helped it secure favorable financing terms unavailable to Chevron.
Despite the prospect of six months or more of uncertain regulatory haggling, Unocal's board nearly approved the CNOOC offer until Chevron increased its bid last month. CNOOC had been willing to raise its all-cash bid even further, but Unocal balked at the conditions, which included Unocal publicly endorsing the CNOOC offer and shouldering the $500 million breakup fee that would be owed to Chevron.
Earlier this month, CNOOC withdrew its bid, citing "unprecedented political opposition."
"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," the company said.