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China is taking a historic step toward its ambition to become a global resources powerhouse with a $15.1-billion (U.S.) bid to buy Calgary-based oil producer Nexen Inc.
The bid by state-backed CNOOC Ltd. is the largest by a Chinese firm for a foreign company, and confirms that Canada has become a proving ground for China’s rise in the global economic order as it deploys some of its trillions of dollars in foreign reserves to secure strategic resource properties around the world.
The deal builds on a string of previous acquisitions by Chinese firms in Canada’s oil sands. It would be the second-largest deal ever in Canada’s energy sector and, if approved, the sixth-largest takeover ever in Canada. Though it may test the Harper government’s stance on foreign ownership, two years after it blocked a $39-billion (Canadian) takeover offer for Potash Corp. of Saskatchewan Inc., there are strong indications that the deal will be approved.
For one, CNOOC, China’s third-largest oil company, has cultivated relationships with top players in Ottawa in recent years.
In March, CNOOC executive Fang Zhi met with deputy ministers from Natural Resources Canada, International Trade and Industry Canada to discuss its acquisition ambitions in Canada, in general terms. The Prime Minister’s Office was advised of the deal on Sunday.
And because most of Nexen’s oil output comes from outside Canada, most analysts expect CNOOC’s offer to eventually win the blessing of Prime Minister Stephen Harper, who has actively courted Chinese investment in Canada during visits to China.
In a friendly takeover deal announced Monday morning, CNOOC (originally known as China National Offshore Oil Corp.) offered $27.50 (U.S.) in cash for each share of Nexen – valuing the company at more than 60 per cent above its closing price on Friday.
Nexen and CNOOC were already partners in a heavy oil development at Long Lake, southeast of Fort McMurray, that has so far fallen short of its investors’ hopes.
“We are in Canada to invest,” CNOOC chief executive Li Fanrong told reporters in a conference call. “We intend to be a local company as much as a global one.”
For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/report-on-business/international-business/asian-pacific-business/nexen-bid-part-of-chinas-plan-to-become-resources-powerhouse/article4436971/