In a deal worth $15.1 billion, state-owned Chinese oil conglomerate CNOOC has agreed to buy all outstanding shares of Calgary-based Nexen Inc.
CNOOC will pay $27.50 (US) per share -- in cash -- well above its Friday closing price.
“This transaction delivers significant and immediate value to Nexen shareholders,” said Kevin Reinhart, president and CEO of Nexen.
“The offer represents a premium of 61% to the closing price of Nexen’s shares on the New York Stock Exchange last Friday and a premium of 66% relative to the 20-day weighted average trading price of our shares.”
The deal must still be signed off on by the federal government.
“There was some work in preparing for conversations with the government,” Reinhart said.
“Initial phone calls were made to them but it is premature to talk about any of the reaction.
“We will work together to file the necessary applications and to work with the various governments to ensure they have all the information they need to make the right decision.”
Calgary will serve as an international headquarters for CNOOC, with the local office overseeing its North and South American operations.
Analyst Peter Linder with Emerging Equities called the deal beneficial for both sides.
“Every time you have a takeover of such magnitude, it validates the real value of Canadian oil and gas companies versus what the market gives you,” he said.
The fact a foreign entity is acquiring one of the largest oil and gas companies in Canada is not cause for concern, Linder said.
“It matters to some people but it should not matter,” he said.
“A good chunk of Nexen’s assets are not in Canada, they’re in the North Sea, the Gulf of Mexico and other parts of the world.
“Also, much of their future production growth will come from the oilsands and that requires an enormous amount of capital to develop, which the Chinese will bring in.”
And Linder thinks the deal will have a good chance of getting federal approval.
“This wouldn’t have gone forward without some clear indication that subject to certain factors, the government will approve it,” he said.
“Clearly the fact (CNOOC) will establish an office in Calgary is very, very positive and the fact they will spend a lot more money in this country in terms of investments and employment than Nexen would have done is also very positive.
“In all respects it’s a win-win situation.”