The economic crisis has left the US and Canada selling off tantalising slices, but beware of fickle regulators that may leave a bitter aftertaste, writes Aliyah Shahid

Jaws dropped worldwide in 2005 when a Chinese oil giant offered an eye-popping US$18.5 billion in its bid to take over American oil behemoth Unocal.

Of course, China National Offshore Oil Corp (CNOOC) was never a lock to win Unocal. Also in the mix was Chevron, the second-biggest US oil company , which had long sought Unocal’s vast assets of oil and natural gas that are largely scattered across the US and Asia. CNOOC didn’t get Unocal. Chevron did. The Chinese oil titan dropped its bid in August 2005, in the face of public outcry and fierce political opposition to what would have been the largest takeover in history of a US company by a Chinese outfit.

Politicians on Capitol Hill argued that the state-owned oil company was acting on behalf of the Chinese government, and would exercise undue influence over US energy supplies. National security was at risk, they insisted.

That cleared the path for Chevron to finalise its own deal and nab Unocal for about US$17 billion – significantly less than the Chinese offer.

In the aftermath of the CNOOC firestorm, it became fashionable to blame congressional delays and opposition for the failed Chinese takeover bid. Also the target of much finger pointing: the Committee on Foreign Investment in the US (CFIUS), which is charged with weighing the national security implications of foreign investments.

But the armchair experts may have this one wrong. Elliot Feldman, a partner at Baker Hostetler and leader of the firm’s international trade practice, told China Business Law Journal that CFIUS actually wasn’t to blame for the failed deal. Instead, he argues, the botched bid was a direct result of Chinese reluctance to properly anticipate easily foreseeable criticism of the deal – and to pre-emptively put out those fires before they were sparked.

“In the Unocal case, as in some others, an intelligent approach would have included identification and dissemination of benefits for the United States, especially whether the acquisition might lead to more American jobs,” Feldman says. “It would have been prudent to talk with impacted elected officials, local and national, before proceeding, reassuring them that CNOOC wanted to be a good citizen.

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