When China’s Cnooc Ltd. (NYSE: CEO) made its offer of $15.1 billion to acquire Canada-based Nexen Inc. (NYSE: NXY), the offer quickly brought to mind Cnooc’s failed 2005 $18.5 billion offer for Unocal, which was subsequently scooped up by Chevron Corp. (NYSE: CVX). Cnooc ran into unexpected difficulty when U.S. legislators started making noise about the sale of U.S. assets to China.
In the Nexen deal, Cnooc took its time and just today filed for approval from the Canadian government for its acquisition of Nexen. The government has 45 days to act on the filing and could ask for a 30-day extension. Further delays are also possible based on mutual agreement. That means we should know whether or not the deal will go through no later than mid-November barring additional delay.
Because Nexen owns some U.S. assets, the Committee on Foreign Investment in the United States, or CFIUS, must also approve the deal. That could be a larger issue for Cnooc and Nexen than Canadian approval. Senator Charles Schumer has already asked CFIUS chairman Timothy Geithner to block the deal until China grants more access to its markets for U.S. companies.
Canada welcomes big investments from deep-pocketed firms without the concomitant demands for reciprocal opportunities for Canadian firms to invest in China. In general, Canadian firms are not likely to make investments on the same scale as larger U.S. companies.
The Cnooc-Nexen story is just getting started, and Nexen’s shareholders appear to be aware of that. The share price today is $25.43, down just 0.05%, but shares have never even approached the Cnooc offer of $27.50/share. Nexen’s 52-week range is $13.63-$26.21.
Paul Ausick
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