TORONTO (AP) — Shareholders of Canadian oil and gas producer Nexen Inc. voted Thursday to approve a proposed $15.1 billion takeover of the company by Chinese state-owned CNOOC, but the foreign takeover still requires approval by the Canadian government.
Ninety-nine percent of shareholders voted to approve the $27.50 per share offer. It would be China's biggest overseas energy acquisition.
CNOOC and other big state-owned Chinese energy companies have increased purchases of oil and gas assets in the Americas as part of a global strategy to gain access to resources needed to fuel China's economy. The companies have moved more carefully since CNOOC tried seven years ago to buy Unocal but was rejected by U.S. lawmakers citing national security fears.
The acquisition must be deemed a "net benefit" to Canada and concerns have been raised by Ten Menzies, a ruling Conservative lawmaker in Alberta, who said he has been getting a lot of negative feedback from constituents about the takeover by a state-owned Chinese firm.
Nearly all foreign takeovers are approved in Canada, but Canada's Conservative government did reject Anglo-Australian BHP Billiton's hostile takeover bid for Saskatchewan's Potash Corp. in 2010 and the sale of Vancouver-based MacDonald, Dettwiler and Associates' space-technology division to an American company in 2008. In the case of Potash Corp., the local Saskatchewan provincial government was against the foreign takeover of a company that controls 25 percent of the world's supply of potash.
But Canada's Conservative government has allowed Chinese companies to take stakes in energy companies and Prime Minister Stephen Harper has made trade with China a top priority.
Wenran Jiang, an energy expert and professor at the University of Alberta, said it would be "very strange" if Harper turned down the takeover after spending months courting Chinese investment. He noted that just 28 percent of Nexen's assets are in Canada and he expects the takeover will be approved. Canada's industry minister announced Aug. 29 that the formal review of the Nexen proposal under the Investment Canada Act started. The review will take 45 days initially from that date, but can be extended by 30 days or more.
There are doubts the takeover will be approved as shares are trading below CNOOC's offer. Shares were down eight cents to $25.24 in early afternoon trading on the New York Stock Exchange on Thursday.
Nexen's board approved the takeover in July after CNOOC offered a 62 percent premium on the stock price.
The deal had required approval by two-thirds of the votes cast by both Nexen's common and preferred shareholders. The preferred shareholders voted 87 percent to approve the agreement.
The Chinese energy giant welcomed the results of the shareholder vote.
"The offer is a compelling one, and offers benefits for all Nexen's stakeholders, including employees and communities," CNOOC spokesman Peter Hunt said in a statement. "CNOOC Limited will continue to pursue all regulatory approvals required to close the transaction."
Nexen, a mid-tier energy company in Canada, operates in western Canada, the Gulf of Mexico, North Sea, Africa and the Middle East, with its biggest reserves in the Canadian oil sands. It produced an average of 213,000 barrels of oil a day in the second quarter of this year.
In an apparent show of commitment to Canada's interests, CNOOC is pledging to set up a regional headquarters in Calgary, Alberta, where Nexen is based. It also says it will keep the Canadian company's management and projects in place and list shares on the Canadian bourse. Nexen interim chief executive Kevin Reinhart China said Thursday CNOOC wants to keep the Nexen name and expand the role of the company's Calgary headquarters to manage not just Nexen's assets but also some $8 billion of the Chinese company's other assets in North and Central America.
"This transaction will in no way close the book on Nexen or our way of doing business," Reinhart told shareholders after the vote to approve the deal.
Nexen and CNOOC were familiar with one another before the deal was announced. The two are partners in the Long Lake oil sands project near Fort McMurray, Alberta, which has been beset by a litany of operational glitches and has yet to come close to meeting its production targets. The two companies are also partners in the Gulf of Mexico.