Expanding Canadian Presence, China's Cnooc Buys Nexen for $15B

Marking one of Beijing's biggest bets in North America yet, China’s Cnooc unleashed a $15.1 billion takeover on Monday of Canadian energy company Nexen (NYSE:NXY).

Cnooc, China’s largest producer of offshore crude oil and natural gas, agreed to pay $27.50 a share for Nexen, representing a healthy premium of 61% on the shares’ Friday close of $17.06.

The transaction marks the largest foreign acquisition by China and its largest play in North America, according to The Wall Street Journal.

Based in Calgary, Nexen employs more than 3,000 people and has oil and gas assets in the U.K., Gulf of Mexico and offshore West Africa. Last year the company generated revenue of $6.4 billion, and produced 207,000 barrels of oil equivalents per day.

“This is an exciting opportunity for us to build on our existing joint venture relationship with Nexen in Canada, and to acquire a leading international platform in the process,” Wang Yilin, chairman of Cnooc, said in a statement.

The pact still needs to be approved by U.S. and Canadian regulators, some of whom may express concern about China’s growing influence in the critical energy market.

Perhaps signaling worries about regulatory approval, shares of Nexen traded well below the $27.50 offer price. In recent action, Nexen was up 52.64% to $26.03. Cnooc was recently down 4.18% to $194.27.

Cnooc, officially the China National Offshore Oil Corporation, spelled out the benefits it believes the transaction will have for Canada. These apparent benefits include making Calgary Cnooc’s North and Central American headquarters, plans to keep the current management team and workforce in place and an intent to list Cnooc’s shares on the Toronto Stock Exchange.

In the U.S., Cnooc said its “investments in exploration and development” in the Gulf will be “maintained.”

“This transaction will allow for significant investment in our business and opens the door to new opportunities for our employees,” said Nexen interim CEO Kevin Reinhart.

Cnooc said it plans to pay for the acquisition through internal and external financing and if the deal is approved, Nexen will become a wholly-owned unit of Cnooc.

“This transaction delivers significant and immediate value to Nexen shareholders,” said Barry Jackson, Nexen’s chairman in a statement.

Cnooc holds investments in a slew of Canadian companies, including MEG Energy and OPTI Canada.

Citigroup (NYSE:C) and BMO (NYSE:BMO) served as Cnooc’s financial advisors, while Nexen was advised by Goldman Sachs (NYSE:GS) and RBC (NYSE:RY).