Daylight says to be bought by Sinopec for C$2.2 billion

Sun Oct 9, 2011 6:43pm EDT
 
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(Reuters) - Canadian oil and gas explorer Daylight Energy Ltd DAY.TO said on Sunday it has agreed to be acquired by China's Sinopec International Petroleum Exploration and Production Corp for about C$2.2 billion.

The deal for Calgary, Alberta-based Daylight is for C$10.08 per share. That is more than double the closing price of Daylight's closing price of C$4.59 on Friday, but the company noted it is only a 43.6 percent premium over the 60-day weighted average trading price.

SIPC is a subsidiary of China Petrochemical Corp and undertakes overseas investments and operations in the upstream oil and gas sector, Daylight said in its release announcing the deal.

The purchase "recognizes the highly attractive asset portfolio and exceptional team that we have assembled at Daylight," Daylight Chief Executive Officer Anthony Lambert said in a statement.

A combination of falling oil prices and debt levels has hit Canadian oil and gas shares in recent months as investors fret that growth prospects are shriveling.

The transaction would mark the latest energy sector deal between China and Canada. In July, China's top offshore oil producer, CNOOC Ltd (0883.HK: Quote) agreed to buy struggling Opti Canada Inc OPC.V for $34 million and $2 billion in debt.

But this deal could be large enough to face review under the Investment Canada Act, which must determine if foreign purchases of domestic firms are of net benefit to Canada.

Just under a year ago the government vetoed BHP Billiton's (BHP.AX: Quote) $38 billion offer for Saskatchewan-based Potash Corp (POT.TO: Quote), only the second such veto under the legislation, a move that prompted concern among international investors who worried that Canada was not 'open for business'.

Still, the energy sector is considered less concentrated than the strategic Potash sector, and previous foreign takeovers of domestic energy firms have gone ahead. Sinopec already owns a stake in the huge Syncrude Canada oilsands venture.   Continued...