Cnooc Ltd. (883) is seeking about $5 billion in offshore financing from foreign banks to back its acquisition of Canada’s Nexen Inc. (NXY), according to two people familiar with the matter.
China’s largest offshore oil and natural-gas explorer is considering a bridge loan, as well as longer-term financing of three or five years, the people said, asking not to be identified because the details are private.
Cnooc last month agreed to pay $15.1 billion in cash to acquire Nexen in the biggest overseas takeover by a Chinese company. Cnooc, owned by the Chinese government and based in Beijing, offered to pay $27.50 for each common share, a premium of 61 percent to Calgary-based Nexen’s closing price on July 20, according to its July 23 filing to the Hong Kong stock exchange.
“We intend to fund the purchase price from existing cash resources and external financing,” a Beijing-based Cnooc spokesman said via e-mail yesterday, declining to be identified citing internal company policy.
Nexen’s oil and gas assets include production platforms in the North Sea, the Gulf of Mexico and in Nigeria, as well as oil-sands reserves at Long Lake, Alberta, where it already produces crude in a joint venture with Cnooc. Its board recommended the deal to its shareholders.
Reducing U.S. Dependence
The takeover comes as Canadian companies prepare to build new pipelines for transporting the nation’s fossil fuel to Asia in an effort to reduce its dependence on the U.S. market. The companies intend to put the deal to the Committee on Foreign Investment in the U.S. for review, according to a July 24 filing with the U.S. Securities and Exchange Commission.
If approved, the takeover would mark the first time a Chinese company would be the operator of leases in the U.S. Gulf of Mexico, instead of a minority stakeholder.
“M&A-related loans will make up a significant portion of lending this year in the Asia-Pacific region,” Siong Ooi, the Hong Kong-based head of Asia-Pacific loan syndications at Bank of America Corp. said in a phone interview yesterday. “It’ll be driven especially by Chinese companies making overseas acquisitions.”
Syndicated loans in the Asia-Pacific region outside of Japan total $8.6 billion last month, bringing year-to-date volumes to $167.9 billion, according to data compiled by Bloomberg. That’s 37 percent down on $265.5 billion the same period of last year, the data show.
Loan volumes have been dropping as banks’ wholesale cost of funding increases and borrowers, faced with rising interest costs, postpone refinancing. Average interest margins for U.S. dollar loans in Asia ex-Japan rose to 270.8 basis points since Dec. 31 from 247.8 basis points the same period of 2011.
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