CNOOC to buy Nexen for $15.1 billion in China's largest foreign deal

Tue Jul 24, 2012 8:22am EDT
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By Lee Chyen Yee and Jeffrey Jones

HONG KONG/CALGARY (Reuters) - State-controlled CNOOC Ltd launched China's richest foreign takeover bid yet on Monday by agreeing to buy Canadian oil producer Nexen Inc for $15.1 billion, forcing Ottawa to decide whether security concerns outweigh its desire for foreign investment in its energy resources.

CNOOC, China's third-largest oil company, hopes to sell the deal to shareholders and the government with a hefty 61 percent premium to Nexen's Friday stock price. It promised to retain all employees and to make Canada home base for its Western Hemisphere operations.

CNOOC is offering $27.50 cash a share for Nexen, which has oil sands operations in the Canadian province of Alberta, shale gas in the province of British Columbia and extensive exploration and production holdings in the North Sea, Gulf of Mexico and offshore West Africa.

The initial shareholder reaction was enthusiastic. Shares of Nexen, whose board unanimously approved the deal, surged C$9.06, or 52 percent, to C$26.35 in Toronto on Monday.

"You won't find a single shareholder on the entire planet, or in the solar system, who is unhappy with this deal," said David Taylor, president and chief investment officer of Taylor Asset Management.

The move is the most ambitious foray by resource-hungry China into North American energy since a 2005 attempt to buy U.S.-based Unocal for $18.5 billion was thwarted by a political backlash there.

Chinese companies have been among the most aggressive in targeting assets around the globe to help feed demand in the world's second-biggest economy.

As for Canada, Prime Minister Stephen Harper has pushed to attract more energy investments from China. The CNOOC deal shows his efforts are bearing fruit, and Canada has more reasons to accept the deal than to veto it.   Continued...

A woman walks past the entrance of the headquarters of China National Offshore Oil Corp (CNOOC) in Beijing in this September 23, 2010 file photograph. REUTERS/Petar Kujundzic/Files