Chinese energy giant
CNOOC Ltd.
(
CEO
) accepted the clauses laid down by the Canadian government for
its acquisition of the Calgary, Alberta-based energy producer
Nexen Inc.
(
NXY
) for approximately $15.1 billion in cash, as per a report from
Bloomberg.
To make the road for approval more stringent, Alberta Premier
Alison Redford had made a request to the Canadian government last
month to insist that at least half of the members of Nexen's
board and management be held by Canadians.
Other recommendations for CNOOC include maintenance of workforce
levels for at least five years. This will ensure the maintenance
of planned capital spending and an elucidation of research and
development goals post merger.
The contract is still subject to approvals from Canada's industry
ministry. The Canadian government is reviewing the sale of Nexen
keeping in mind the country's foreign-takeover law that states
any such deal should have a "net benefit" to the country for
getting the crucial go-ahead. In this respect, it is worth noting
that the Canadian government has extended its review program for
the second time on November 2 and has put the deadline on
December 10.
The developed world will now be faced with a difficult test of
accepting Chinese capital that would also mean the relinquishing
of control over strategic resources. For more than a quarter this
deal has become a debatable issue. A few representatives from the
governing Conservative Party has been overwhelmingly negative on
the deal with detractors concerned about such a significant
possession going into Chinese hands.
Notably, CNOOC − China's biggest offshore oil and gas producer −
highlighted during the July 23 bid that upon the successful
completion of the deal, CNOOC will list its shares on the Toronto
Stock Exchange. It will also retain Nexen's existing employees,
and establish Calgary as its North and Central American
headquarters.
As the world's second-largest economy, China has a huge energy
requirement. The Nexen acquisition bid foregrounds not only the
bold attempt of CNOOC but also of other Chinese biggies to make
deeper inroads into the international energy markets for the
specific aim of meeting domestic demand. We note that the CNOOC
bid for Nexen marks the biggest Chinese takeover attempt so far.
We maintain our long-term Neutral recommendation on CNOOC. The
company currently retains a Zacks #3 Rank (short-term Hold
rating).
CNOOC LTD ADR (CEO): Free Stock Analysis
Report
NEXEN INC (NXY): Free Stock Analysis Report
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