Nexen takeover benefits mixed, DBRS says
Ratings agency says deal would 'dramatically' improve Canada-China relations
The net benefit of a $15.1-billion takeover of Nexen Inc. by a Chinese company is "somewhat mixed" because the deal offers only limited direct financial benefits but may help trade relations, says the DBRS debt-rating agency.
A DBRS report released Wednesday says the deal is not financially necessary for Nexen, which is already a strong company with good access to capital markets, but an approval could benefit the country.
"The overall net benefit to Canada is somewhat mixed, in terms of economic and political aspects," said James Jung, a senior vice-president at DBRS.
"The transaction would dramatically improve Canada-China relations, which could in turn provide greater economic trade between the two countries."
Ottawa is reviewing the $15.1-billion takeover by the Chinese National Offshore Oil Company under the Investment Canada Act, which says large deals must be of "net benefit" to Canada..
The federal government essentially killed BHP-Billiton's hostile takeover bid for Potash Corporation of Saskatchewan when it said the deal didn't meet the "net benefit" standard.
Jung said if the Nexen transaction is approved, other multinational companies and state-owned entities could follow suit.
Foreign investment in oilsands to rise
"The level of foreign direct investment in Alberta's energy resources, particularly in oilsands, is poised to rise at an ever-increasing rate," Jung said.
Nexen shareholders voted to approve the takeover last week.
Concerns have been raised in Ottawa by both sides of the House of Commons about the deal.
Alberta Tory MP Ted Menzies has said he's been getting a lot of negative feedback from constituents about the takeover by a state-owned Chinese firm.
Nexen and CNOOC are already partners in the Gulf of Mexico and at the Long Lake oilsands project near Fort McMurray, Alta.
While CNOOC's deal for Nexen may be the largest deal so far in the Canadian oilpatch involving a Chinese company, other Chinese firms have been active in the sector.
Talisman Energy has signed a deal to sell a 49 per cent interest in its UK division to Chinese firm Sinopec Corp. for $1.5 billion, while Athabasca Oil Sands Corp. sold its remaining 40 per cent stake in the MacKay River oilsands project to joint-venture partner PetroChina.
Last year, Sinopec bought conventional oil and gas-focused Daylight Energy Ltd.