Shareholders of China National Offshore Oil Corp (CNOOC), the
nation'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 percent 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 CNOOC 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?that 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, Yang Hua said.
He said CNOOC's parent could pursue projects investors might
feel 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 January 4, 2006)