Chevron/Unocal: Chinese chess

Chevron has a problem. Its $16.4bn bid for US oil firm Unocal has been trumped by a rival offer from China’s CNOOC. What should it do next? In a normal M&A battle it would have to top CNOOC’s offer. But there are two problems with this. The first is that Chevron has already offered a rich price for Unocal – so besting CNOOC’s higher offer would be expensive indeed. The second is that CNOOC, being a state-controlled company, is playing M&A poker with house (or rather Beijing) money. So if Chevron...