Nexen Sale To CNOOC Gains Canadian Government Backing
China's biggest ever foreign takeover, of Calgary gas producer Nexen, has been approved by the Canadian government; the Chinese state-owned company CNOOC (China National Offshore Oil Corp) has moved another step closer to pushing the huge deal through.
As the most significant overseas investment ever progressed by a company in China and China's largest foreign takeover, this decision has been watched closely by market participants in both Canada and China.
The Canadian PM Stephen Harper has advised that following months of debate and a "difficult decision, the govt would allow CNOOC to take-over the Canadian company. Harper also stated that this deal represented a significant opportunity for Canada.
The Nexen deal was originally announced in July this year, with Nexen shareholders approving the $15.1bn deal in September. There have been extended debates around the subject of foreign investment in the nation's natural resources sector and PM Harper has advised that "going forward, the minister will find the acquisition of control of a Canadian oil sands business by a foreign state-owned enterprise to be of net benefit only in an exceptional circumstance."
Merger-and-acquisition deals like these are sometimes viewed as having a supportive affect on a nations currency and this deal may see additional Canadian dollar demand. This is ultimately seen as Canadian dollar positive and the USD/CAD (US to Canadian dollar forex rate) could potentially drop following a deal, all else being equal. The Forex price action on the USD/CAD gave a quick drop on Friday, in the minutes prior to the Nexen announcement.