CNOOC Resubmits Nexen Deal for US Review

on Nov 28, 2012

China’s oil and gas company CNOOC Ltd (HKG:0883, NYSE:CEO) and the Canadian energy producer Nexen (TSE:NXY) have resubmitted notice of their proposed deal to US regulators, the Calgary-based Nexen announced in a statement late on November 27.

**CNOOC, Nexen Reapply for US Approval**
CNOOC and Nexen withdrew and resubmitted their notice of the C$15.1 billion (£9.4 billion) takeover deal for review by the Committee on Foreign Investment in the United States (CFIUS) which evaluates foreign takeovers of US companies on national security grounds. Although most of Nexen’s operations are based outside the US, the company’s US unit has oil and gas blocks in the Gulf of Mexico.

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While both CNOOC and Nexen did not provide any reason for the notice resubmission, the Financial Times quoted sources with knowledge of the matter as saying that the CFIUS was close to running out of time on its review of the deal and was likely to have been reluctant to pre-empt a decision by Canadian regulators. A Beijing-based lawyer familiar with the CFIUS approval process has noted that withdrawing an application was very uncommon. “Resubmission happens sometimes essentially to restart the clock with a modified application,” the lawyer commented, as quoted by the FT.

!m[The Takeover Seen As “Moving Along” In Canada](/uploads/story/920/thumbs/pic1_inline.png)Reuters, however, quotes Derek Scissors, research fellow at the Heritage Foundation in Washington, as seeing the resubmission as unlikely to be a major stumbling block for the transaction. “It typically occurs when there’s a declaration by the applicant that runs afoul of a CFIUS regulation but can be reformulated, pointed out Mr Scissors, as quoted by Reuters. “The reformulations usually are procedural, not material.”

**Deal “Moving Along”**
On November 28, Bloomberg reported that the takeover deal was “moving along” in Canada, quoting Alison Redford, premier of the Canadian province of Alberta, where Nexen’s headquarters is located. “This is a decision the federal government will make. We understand that it’s moving along and everything is being considered,” noted Ms Redford, as quoted by Bloomberg, adding that that the deal was “an important investment for Alberta and for Canada.”

The Canadian government is currently reviewing the sale of Nexen under its takeover law, with the decision expected on December 10, after Canada extended the deal review for a second time on November 2. Bloomberg quotes the Canadian Industry Minister Christian Paradis as saying that his government was working on a legal framework including new provisions for foreign investments. Currently, foreign takeovers need to meet Canada’s requirement for bringing “net benefits” to the country.


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