CNOOC (Chinese) to Buy Nexen

[bizaro86]

http://www.cbc.ca/news/business/stor...723-nexen.html

Any thoughts on what affect this will have on Calgarians? Jobs, real estate, etc. Will the feds allow this to go through or will it get blocked like the Potash deal? I'd also be interested to know what they're doing for retention of employees.

[Regulator75]

Nexen is having an emergency townhall meeting at 11:00 am today.

[red sky]

Only 28% of Nexen's production is in Canada and there is also an agreement to retain NXY's management team and for CNOOC to establish Calgary as its North and Central American headquarters. I don't see this being an issue for the feds.

[Parallex]

Will the feds allow this to go through or will it get blocked like the Potash deal?

I'd wager on it being blocked. Unless there's zero rabbling about it (which given that nationalists tend to be sensative about foreign takeovers, and lot's of folk have a hate on for China stricks me as unlikely).

[Husky]

Underperforming company taken out by an Asian company to secure their own energy needs.

[Ducay]

Ugh, not a fan of this, if only because it is likely a sign of things to come. Hopefully there is some pushback and the feds step in, but given the premium being paid on each share, I can't see there being too much anger from the shareholders.

[bizaro86]

Originally Posted by Ducay

Ugh, not a fan of this, if only because it is likely a sign of things to come. Hopefully there is some pushback and the feds step in, but given the premium being paid on each share, I can't see there being too much anger from the shareholders.

With a premium like that the shareholders will vote in favour (unless they get a higher offer, which seems unlikely, imo). The only real question is the regulatory side, will the government say this isn't a net benefit to Canada and block the deal. I doubt it (based on size) but you never know. It'll depend how big a political deal it becomes.

[kirant]

Originally Posted by Husky

Underperforming company taken out by an Asian company to secure their own energy needs.

That's about the jist of it from what I've read.

On a side note, the CBC users are terrible. I got a headache reading the top 20 comments.

[Regorium]

That premium is insane.

My biggest issue with this is basically how Chinese companies have (nearly) unlimited financial backing from their government. They're not really playing by the same rules as everyone else, which allows them to make such ludicrous offers like this in order to establish footholds in other markets.

Otherwise, business is business. I don't see shareholders turning down a 66% premium in their share price.

[La Flames Fan]

Really dumb question, but do the foreign ownership rules not apply? T-Mobile can't buy Telus, why can they buy Nexen?

[Cowboy89]

Originally Posted by La Flames Fan

Really dumb question, but do the foreign ownership rules not apply? T-Mobile can't buy Telus, why can they buy Nexen?

Federal Legislation and some bylaws of the CRTC have determined that the banking and telecommunications sectors are somehow 'special' and therefore have various ownership restrictions including foriegn ownership restrictions.

[Regular_John]

My father in law works for Nexen, should be some interesting Sunday dinner conversation this week.

[J pold]

Man it would have been amazing to be on the Investment Banking team that advised on this deal.

[Ducay]

Originally Posted by Regorium

That premium is insane.

My biggest issue with this is basically how Chinese companies have (nearly) unlimited financial backing from their government. They're not really playing by the same rules as everyone else, which allows them to make such ludicrous offers like this in order to establish footholds in other markets.

Otherwise, business is business. I don't see shareholders turning down a 66% premium in their share price.

I agree its a pretty huge premium, but given how depressed prices/share prices are now, its not really much of a premium overall from prior trading prices. Nexen has traded in that ballpark before, so its not like they're really paying more than what the company is worth in a "normal" economy. They're just taking advantage of the fire sale that is on right now with share prices. But the shareholders are happy to get that price and avoid steep losses and years of depressed prices.

I just don't see how this is at all seen as a "net benefit" to Canada, given the amount of money that will be flowing offshore now, I can't see any increase in capital spending/re-investment making up that difference.

[SeeGeeWhy]

Originally Posted by bizaro86

http://www.cbc.ca/news/business/stor...723-nexen.html

Any thoughts on what affect this will have on Calgarians? Jobs, real estate, etc. Will the feds allow this to go through or will it get blocked like the Potash deal? I'd also be interested to know what they're doing for retention of employees.

Calgarians have been benefiting from foreign national interests buying assets at discounted prices during the entire economic downturn. That's in terms of jobs and support on stock prices on the basis of takeover/JV speculation.

We have had Chinese, Middle East, South African, Korean, and other interests buying in Alberta for years, and it is just picking up. The Chinese in particular have been more pragmatic because they have deeper pockets, greater demand for the resource, and place far more strategic importance on these assets. There is a longer term vision that goes beyond a few fields here and there. Canada is not the only place they are active, and producing the resource is not the only interest they have. They want to find other ways to ensure their manufacturing, research and skilled labour demand stays high, for instance. As an example, they will be finding ways to use as much "made in china" product at future facility installations as possible. They want to own Canadian engineering firm capacity to give a foothold for more work to domestic engineering, and to deploy the results from those designs to other fields globally. Etc.

It is also interesting that CNOOC, Sinopec and CNPC all act independently when doing these deals. I can tell you that with CNOOC closing this big deal in two stages, it embarasses and puts pressure on those working at Sinopec and CPNC to follow suit.

Personally, I don't think this deal gets blocked, and I agree with the reasons already posted. The potash deal was specifically sensitive due to the importance that company holds for the economy and culture of Saskatchewan. Nexen is a big company, but they do not define Alberta's economy or employ a significant percentage of our population. They've also learned from the failure of the Unocal deal, and the success of others... not only where, but how to do business.

When someone says its not fair that the Chinese are able/allowed to do this, that they don't play by the same rules. That is a load of crap. If, for example, Exxon had the financial resources that the Chinese have, you can be assured they would probably as agressive or even moreso in their acquisitions. Its not just financial resources, its human resources they have. They employ millions of people in those three companies, it is just insane... Are those people suggesting that the Rockefeller run Standard Oil shouldn't have been busted up as a monopoly so they could have been more integrated with government than they already are and been able to "compete" in a "more fair" fashion with the likes of other foreign governments? I don't know... our culture and government needs to do what works for us, and have to understand that other places will do things differently. Not everyone can or should be the same.

The only thing that I am adament about on these deals is the regulation of operations and strict observance of qa/qc practices on materials used, fabrication and installation of facilities, and then controls in place during ongoing operations. It truly is a mind shift to be operating in Canada for the Chinese. They are used to doing what they want, where they want, and when they want to do it. BUT they are definitely a very mindful set of companies and will play by the rules that they have to in order to meet their objectives. So we need to be firm on what those rules are, and... quite honestly I think it will work out for both sides in the long run.

[trumpethead]

Originally Posted by J pold

Man it would have been amazing to be on the Investment Banking team that advised on this deal.

I picture this scene somewhere in a Calgary boardroom right now.

[SeeGeeWhy]

Originally Posted by Ducay

I can't see any increase in capital spending/re-investment making up that difference.

Well, when one dry hole in the gulf of mexico eats up over 50% of Nexen's quarterly cash flow, you can't say that having an owner with far deeper pockets and long term needs doesn't increase the odds of their planned Long lake and shale gas expansions being executed.

[La Flames Fan]

Originally Posted by Cowboy89

Federal Legislation and some bylaws of the CRTC have determined that the banking and telecommunications sectors are somehow 'special' and therefore have various ownership restrictions including foriegn ownership restrictions.

Ahhh, I see...Thanks.

[Reaper]

Originally Posted by SeeGeeWhy

Well, when one dry hole in the gulf of mexico eats up over 50% of Nexen's quarterly cash flow, you can't say that having an owner with far deeper pockets and long term needs doesn't increase the odds of their planned Long lake and shale gas expansions being executed.

Hold on, did Nexen get divorced?

[Fire]

Nexen stock is up 50%, too bad I didn't own any. No wonder the stockholders voted in favour of the deal.