Nexen holders OK CNOOC bid as public concern grows

Thu Sep 20, 2012 2:12pm EDT
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - Nexen Inc shareholders overwhelmingly approved the oil producer's takeover by China's CNOOC Ltd on Thursday but the stock weakened as public opposition to a state-owned enterprise absorbing $15.1 billion of Canadian-owned assets appeared to grow.

Shareholder blessing of the deal had been seen as a formality, given the rich 61 percent premium that CNOOC offered on the price of Nexen's shares. But the shares remain well below the $27.50 bid price due to uncertainty over the chances of the Canadian government giving the transaction the green light.

Prime Minister Stephen Harper has actively wooed Chinese investment to help develop the country's energy resources, but recently even members of his government have broken ranks to publicly express discomfort with China taking such a large position, especially in the Alberta oil sands, one of the world's biggest deposits of crude oil.

The Conservative government has launched a review of the deal to determine whether it meets a murky "net benefit to Canada" test.

"I think that's healthy to have a good debate on whether this is in the best interest of Canada, so I'm not surprised we're getting all of those different views coming out," Kevin Reinhart, Nexen's interim chief executive, said following the vote. Holders of Nexen's common shares voted 99 percent in favor of the deal, and preferred shareholders 87 percent in favor.

"In terms of how the transaction unfolds, I'm not going to comment on that. The decision will be made behind closed doors, not in the public forum, hence we've stayed out of those conversations and will work with the regulators to make their decision," Reinhart said.

Nexen shares were down 7 cents at $25.25 on the New York Stock Exchange on Thursday and up 2 Canadian cents at C$24.69 in Toronto. Edward Jones analyst Lanny Pendill told Reuters on Wednesday that he had recommended investors sell their stock to protect gains against political uncertainty over the deal.

The secretive nature of the government's review, which lasts 45 days and can be extended by a further 30, is worrisome, said Peter Julian, member of Parliament for the opposition New Democratic Party.   Continued...

A man walks into the Nexen building in downtown Calgary, Alberta, July 23, 2012. REUTERS/Todd Korol