China oil giant CNOOC is attempting to buy the Canadian oil company Nexen.
July 24, 2012– China is about to close on its largest energy acquisition overseas. Gas and oil giant CNOOC announced it would purchase Nexen Inc. a Canadian oil producer. The purchase agreement is for over $15.1 billion.
The deal must receive approval by the government of Canada, which has denied foreign interest previously over worries about protecting the natural resources industry in the country. CNOOC along with other Chinese energy companies that are state-owned have purchased a number of gas and oil assets across the Americas. This is part of their global strategy to get access to the resources they need to fuel the world’s second largest economy.
Seven years ago, CNOOC was rejected by the lawmakers in the U.S., from buying Unocal. Lawmakers citied fears of national security, as their reason for denying the sale. During 2002 and 2003, Chinese energy businesses acquired over $2 billion worth of assets. That figured skyrocketed to over $48 billion between 2009 and 2010. Most of the time, the Chinese companies have paid above the average for the industry to ensure the deals are completed.
The Nexen deal is an example of that, as the offer amounts to $27.50 per share or a 60% premium over Friday’s closing price on the NYSE. Shares increased to $25.95 or by 52% on the news. The Chinese energy company hopes the deal is finalized and the takeover completed by the fourth quarter of 2012.
Nexen is based in Calgary, Alberta and operates in the Middle East, the North Sea, Africa, the Gulf of Mexico and its own backyard in western Canada.