The frenetic M&A action in Canada's energy sector shows no signs of cooling off, as demonstrated by the $15 billion offer that China National Offshore Oil Corporation (CNOOC) made on July 23 for Calgary-based Nexen Inc., a major player in Alberta's oil sands. What may be cooling off is the Canadian government's enthusiasm for foreign ownership in the sector.
Ottawa announced on October 11 that it was extending its review of the Nexen takeover for 30 days. On October 19 the government blocked a similar dealthe planned $5.2 billion takeover by Malaysian stateowned Petroliam Nasional Berhad (Petronas) of Progress Energy Resources Corp., another Calgary-based Canadian energy power [Canadian Big Deals, September]. The Petronas/Progress rejection shook the Canadian oil industry, and all eyes immediately turned to the CNOOC/Nexen deal, with one obvious question: Could it also fail to win Ottawa's approval?
When CNOOC announced its all-cash offer of $27.50 per Nexen share, the bid represented a premium of 61 percent over Nexen's share price on the New York Stock Exchange at the close of the previous trading day. In all, the offer includes $15.1 billion in cash, as well as assumption of $4.3 billion in Nexen's debt, which will remain outstanding. Nexen shareholders approved the CNOOC offer on September 20.
CNOOC's bid for Nexen is an encore to its $2 billion acquisition of Opti Canada Inc. in 2011. Chinese energy companies have been aggressive buyers in the Canadian oil patch. If CNOOC's bid for Nexen is approved, almost $50 billion will have been spent by Chinese firms acquiring Canadian reserves and firms, according to Bloomberg. That compares to just $3.5 billion that Chinese acquirors have spent on U.S. energy assets.
As for the Petronas deal, the Malaysian company has said that it will appeal the government's decision to block its acquisition of Progress. Government officials said that they needed more time to review the transaction, but Petronas declined to agree to an extension. That appears to have left Canadian officials with a choicethey could bless the deal, but without having completed their analysis of it, or they could block it. Ottawa chose the latter.
For acquiror China National Offshore Oil Corporation (Beijing)
M&A: William Braithwaite, John Ciardullo, Christopher Nixon, and associates Mike Devereux, Christos Gazeas, Benjamin Hudy, J.R. Laffin, and Warren Ng. Energy: Bradley Grant and associates Cameron Anderson and Kurtis Reed. Tax: Ron Durand and associates John O'Connor and David Weekes. Competition: associate Michael Kilby. Pensions: Andrea Boctor and associate Luc Vaillancourt. Employment: Gary Clarke and associates Kelly O'Ferrall and Cheryl Rea. Environmental: Larry Cobb and Greg Plater. Debt: Lewis Smith. Real estate: Mike Dyck. Competition: Susan Hutton and associate Lawson Hunter. (All are in Toronto except for Nixon, Hudy, Grant, Anderson, Reed, Weekes, Clarke, Rea, Plater, and Dyck, who are in Calgary; and Hutton and Hunter, who are in Ottawa.)
Corporate: George Bason, Kirtee Kapoor, Leonard Kreynin, Howard Zhang, and associates James Elworth and Brian Snyder. Antitrust: Ronan Harty. CFIUS review: John Reynolds III. Hong Kong law: Paul Chow and Antony Dapiran. (All are in New York, except for Zhang, who is in Beijing; Kapoor, Chow, and Dapiran, who are in Hong Kong; and Reynolds, who is in Washington, D.C.) The firm advised CNOOC on a $2 billion debt issue offering on the Hong Kong Stock Exchange in April.
Herbert Smith Freehills:
Competition: James Quinney. Energy: Simon Tysoe. (They are in London.) The firm previously advised CNOOC on its joint $2.9 billion acquisition of stakes in three Ugandan oil exploration projects.