Petroliam Nasional Bhd, Malaysia’s state-owned oil and natural-gas company, agreed to buy Progress Energy Resources Corp. (PRQ) for C$4.8 billion ($4.6 billion), in its biggest deal as it moves to export Canadian gas to Asia.
Petronas, as the Kuala Lumpur-based company is known, offered C$20.45-a-share for Progress Energy, 77 percent more than its close before the deal. Including convertible debentures, the deal is valued at about C$5.5 billion, Calgary- based Progress Energy said in a statement yesterday.
Buying the company gives Petronas Chief Executive Officer Shamsul Azhar Abbas ownership of the largest holder in the Montney shale-gas area of British Columbia and full control of the three Progress Energy fields it bought a stake in last year as it explores development of a liquefied natural gas export terminal. Asian buyers have been lured to North America by gas prices that are about 88 percent cheaper.
“The proposed transaction will combine Petronas’s significant global expertise and leadership in developing LNG infrastructure with Progress’s extensive experience in unconventional resource development,” Datuk Anuar Ahmad, executive vice president of Petronas’s gas and power business, said in the statement.
Progress Energy rose 74 percent to C$20.05 at the close yesterday in Toronto. It’s a record gain for the company, which had dropped 13 percent this year.
Petronas joins Asian peers including PetroChina Co., Mitsubishi Corp. and Cnooc Ltd. in seeking production in North America. Alberta gas futures prices were $1.93 per million British thermal units on June 27. Japan, the largest LNG importer, paid $16.78 per million Btu including freight costs as of April 30.
Including debt, Petronas is paying 23 times earnings before interest, taxes, depreciation and amortization. That’s 66 percent more than the average of 10 comparable deals announced since 2003, according to data compiled by Bloomberg.
The purchase is more than double the company’s biggest deal, the $2 billion acquisition of a 40 percent stake in Santos Ltd.’s Gladstone LNG project in Australia in 2008.
Progress Energy has 1.9 trillion cubic feet of proved and probable gas reserves and has 820,000 acres in the Montney shale-gas area. Petronas’s Shamsul said March 30 he was studying making an acquisition of more than $5 billion as he wants to expand the company’s presence in Canada and Australia.
The companies said they’ve selected a site at Prince Rupert, British Columbia, for a potential LNG export terminal and will conduct feasibility studies. Petronas joins groups led by Houston-based Apache Corp., Royal Dutch Shell Plc and the U.K.’s BG Group Plc in the race to export gas from Canada’s West Coast.
Malaysia was the third-largest exporter of LNG in 2010, after Qatar and Indonesia, according to the U.S. Energy Department.
The board of Progress Energy approved the offer and it has the support of the company’s senior executives and the Canada Pension Plan Investment Board, which hold on aggregate about 25 percent of the company’s shares, according to the statement. The transaction is expected to close Sept. 25, subject to government approval.
Petronas intends to keep all Progress Energy employees, according to yesterday’s statement.
Under the Investment Canada Act, the federal government reviews foreign acquisitions of companies with assets valued at more than C$330 million, according to the Industry Canada website. The government has never rejected a takeover of an energy company.
“There shouldn’t be any blocks to the deal,” said Michael Harvey, a Calgary-based analyst for RBC Capital Markets. He rates Progress Energy shares outperform, the equivalent of a buy, and owns none. “The shareholders will vote for it and precedents have been set,” he said.
Petronas has the right to match any superior bid for Progress Energy, according to the statement. Petronas would get a C$150 million breakup fee if the deal is terminated.
Petronas was advised by Bank of America (BAC:US) Corp.’s Merrill Lynch unit and law firm Norton Rose Canada LLP. Progress Energy was advised by BMO Capital Markets and its board received an independent fairness opinion from Scotia Waterous. Burnet, Duckworth & Palmer LLP is its legal counsel.
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