Nexen Inc., the target of the largest overseas takeover by a Chinese company, fell the most in more than three months on concern its $15.1 billion purchase by Cnooc Ltd. may not win government approvals following Canada’s rejection of a bid for Progress Energy Resources Corp.
Nexen, a Calgary-based oil and natural gas producer, dropped 4.4 percent to close at C$24.04 in Toronto and fell 5 percent in New York, about 12 percent below Cnooc’s $27.50 offer price.
The Canadian government rejected Petroliam Nasional Bhd.’s C$5.2 billion ($5.2 billion) bid for Calgary-based Progress Energy on Oct. 19, minutes before the midnight review deadline. Industry Minister Christian Paradis said he wasn’t satisfied the bid is in Canada’s interest. Progress Energy fell 9.3 percent to C$19.64 at 5:06 p.m. in Toronto, the biggest drop since March, 2009.
“The odds of the proposed acquisition by Cnooc getting approval have fallen,” Philip Skolnick, an analyst at Canaccord Genuity Corp. in New York, wrote in a note e-mailed today. “We now give the deal over a 50 percent chance of closing versus our previous ‘high probability it closes’ view, with risk to the offering price.”
Petronas, as the Malaysian company is known, and Progress Energy will meet with officials from the Canadian government to “better understand” objections to the takeover, according to a release today.
“The sector in general will be under pressure, particularly those names that have been viewed as potential targets,” Jim Byrne, an analyst at BMO Capital Markets in Calgary, said in an interview.
Companies including NuVista Energy Ltd., Advantage Oil & Gas Ltd., Birchcliff Energy Ltd., Paramount Resources Ltd. and Painted Pony Petroleum Ltd. pose “the greatest downside in our view,” said Byrne.
NuVista fell 3.2 percent to C$5.13 at the close in Toronto, while Birchcliff fell 5.3 percent to C$8.17.
Canada’s oil and natural gas industry “is heavily dependent on foreign capital and any movement to lessen Canada’s attractiveness will result in lower activity levels,” Peters & Co., a Calgary-based research company, said in a note today.
Cnooc, based in Beijing, has said it will retain Nexen employees, make Calgary the headquarters for its enlarged North American business and will have a secondary listing on the Toronto Stock Exchange.