In what could be termed as one of the most ambitious acquisitions by a Chinese company, state-controlled CNOOC, agreed to buy Canada’s Nexen Inc (NYSE:NXY) (TSE:NXY), for about $15.1 billion.
China’s top offshore oil producer agreed that it would pay $27.50 per common share, which amounts to 61 percent premium to Nexen’s closing price in New York on Friday. CNOOC plans an all cash deal, and will fund the acquisition through its existing cash resources and external financing. The deal was unanimously approved by Nexen board.
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“The aggregate value …of the proposed acquisition is approximately $15.1 billion (approximately HK$117.2 billion), and is to be payable in cash,” CNOOC said in a statement filed on the Hong Kong stock exchange.
Nexen’s assets are comprised of conventional oil and gas, oil sands and shale gas, stretching to many of the world’s most significant producing regions, including Western Canada, the UK’s North Sea, the Gulf of Mexico, and offshore Nigeria. According to the statement from the company, the deal will complement CNOOC’s offshore production in China.
This was not the first time that CNOOC has made a Canadian acquisition. In 2005, it acquired a 16.7 percent share in private oil sand developer, MEG Energy Corp (TSE:MEG), paying C$122 million ($120.76 million USD). Then again in November it completed a C$2.1 billion acquisition of Opti Canada Ltd.
These deals, up till now, have not faced any political opposition in Canada, as was seen in a similar deal in the United States. In 2005, United States opposition killed the $18.5 billion deal by CNOOC for U.S. oil and gas producer Unocal Corp. Canada has a right to review and block any foreign investments worth more than C$330 million, provided the deal is not in Canada’s best interests. It used this right in 2010, when it blocked Anglo-Australian mining giant, BHP Billiton’s, $39 billion hostile takeover of Potash Corp, the world’s top fertilizer producer.
According to an analyst, the deal terms seemed reasonable and in the best interest of CNOOC, “CNOOC has been seeking overseas acquisitions, as the domestic reserves are limited. But there have been many limits, things like foreign companies (that) are reluctant to sell, price too high. This deal would be quite successful.” she said.
BMO Capital Markets and Citigroup Inc. (NYSE:C) Global Markets Inc advised CNOOC, while Nexen was advised by Goldman Sachs Group, Inc.(NYSE:GS) and RBC Capital Markets.
Nexen told sources that the deal will require regulators approval, including those in the United States. The deal is expected to be completed by the end of the year.