Petronas bids $4.7 billion to scoop up Canada shale gas

Thu Jun 28, 2012 4:12pm EDT
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By Jeffrey Jones and Euan Rocha

CALGARY/TORONTO (Reuters) - Malaysia's state oil company launched a C$4.8 billion ($4.7 billion) takeover of its Canadian joint-venture partner, Progress Energy Resources Corp (PRQ.TO: Quote), on Thursday to gain control of vast shale gas reserves and advance plans to ship the fuel to lucrative Asian markets.

Petronas's friendly bid for Progress, at C$20.45 a share, represents a hefty 77 percent premium on the stock's Wednesday closing price. It spurred investors to drive up the shares of other Canadian producers with shale gas assets at a time when they had been languishing due to depressed gas prices.

It is the first instance of an Asian investor launching a buyout of its Canadian partner in a gas project, and will be scrutinized by competition authorities.

"It is a rich deal when you just look at the premium paid, but I think Progress was generally undervalued in the market to begin with," said Brook Papau, analyst at ITG Investment Research in Calgary.

Including debt, the deal is valued at about C$5.5 billion.

Papau wrote in a report last month that Progress's untapped potential, with thousands of drilling locations over the next 15 years, made it ripe for takeover.

Shares of Progress, known for its reserves in British Columbia's Montney tight gas region as well as Alberta's Deep Basin, surged C$8.52, or 74 percent, to C$20.07 on the Toronto Stock Exchange.

LNG RUSH   Continued...