Nexen takeover by China's CNOOC faces political test in Canada

Wed Sep 19, 2012 5:38pm EDT
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - Nexen Inc NXY.TO should have an easy time getting its shareholders to approve the $15.1 billion takeover of the Canadian oil and gas producer by China's CNOOC Ltd (0883.HK: Quote).

The biggest risks to the deal come from politicians and bureaucrats in Canada and the United States as they agonize over how much of the continent's energy assets should be absorbed by a Chinese state-owned enterprise.

Nexen shareholders vote on CNOOC's $27.50-a-share offer at a meeting at a Calgary conference center on Thursday morning, and the transaction is expected to get their blessing easily.

"Unless anybody wants to give back 61 percent, I would think, yeah, the shareholders should be pretty happy with that premium," Morningstar analyst Robert Bellinski said.

Before CNOOC's offer, Nexen had been working to correct years of chronic underperformance with many of its assets, such as the Long Lake oil sands project in Alberta and Buzzard oil field in the North Sea. Before the July 23 announcement the shares sold for $17.06 on the New York Stock Exchange.

Since then, they have hovered well below the bid price on growing fear among investors that the government of Prime Minister Stephen Harper is becoming more uncomfortable with a state-controlled enterprise making such a big acquisition in Canada's energy sector, especially the Alberta oil sands.

The stock closed at $25.32 in New York on Wednesday, 8 percent below the bid. In Toronto, Nexen closed down 8 Canadian cents at C$24.67.

"I don't anticipate any hurdles from the shareholders, and if there were I don't they are thinking through the situation very thoroughly," said Lanny Pendill, analyst at Edward Jones. "But do think there are rising concerns as to whether or not this gets past the Canadian government."   Continued...