Hard-hit Nexen shares soar on Total bid rumours
NORVAL SCOTT
Tuesday, December 02, 2008
CALGARY — Investors bid up Nexen Inc. by $1.25-billion Tuesday in anticipation that a rumoured takeover bid by French giant Total SA could mark the next wave of oil sands acquisitions.
Nexen's stock price surged more than 10 per cent on a European report that Total may be poised to bid for Nexen, but sources said the Nexen board has heard nothing from its French rival.
Nexen is unaware of any potential offer and has not hired advisers to evaluate a bid, investment banking sources said after London's Financial Times reported online that the Total board was meeting.
Nexen, the market value of which has plunged by more than half since June, has long insisted it's not for sale.
Total has secured a €7.5-billion ($11.9-billion) financing package from five banks and its board was deciding whether to proceed with an offer for Nexen, the report said.
It added that Total had been considering the sale of its 13-per-cent stake in pharmaceutical company Sanofi-Aventis to help finance a deal.
“The rumours are too specific not to be taken seriously,” said one investment banker who has worked closely with Nexen. “But Nexen has heard nothing, absolutely nothing, about an offer.”
Nexen said in a statement that it was not aware of any corporate developments that would account for the stock price movement. Total didn't return phone calls seeking comment.
Total, along with other global energy players, is expected to use the economic downturn to acquire reserve-rich companies whose share prices have been depressed.
Nexen has a high-quality asset base, but lower oil and gas prices have forced its market capitalization down from $24-billion in June to $11.5-billion today.
Nexen is also seen as a good fit for Total as its foreign assets – in Yemen, the Gulf of Mexico, the North Sea and Nigeria – are in countries where Total already operates.
Total has been looking to expand its position in the oil sands, and may be keen to acquire Nexen's new Long Lake upgrader in order to process bitumen from the projects it's already developing.
Nexen chief executive officer Charlie Fischer has repeatedly said it makes no sense to sell the company today, given the depressed state of the market.
Last month, he said that if a hostile takeover bid was launched, management and its board would initiate an auction process to secure the highest price for shareholders.
As well as Total, BP PLC and Royal Dutch Shell PLC have previously been linked to Nexen, while any auction could reignite the interest of national Chinese and Indian oil companies in acquiring a stake in the oil sands.
The European report said Total could offer $38 (Canadian) a share, or almost $20-billion.
Nexen's management and shareholders probably wouldn't sell for less than $40 a share, said BMO Nesbitt Burns Inc. analyst Randy Ollenberger.
Nexen (NXY)
Close: $23.88, up $2.03
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