Traders discuss oil futures on the Shanghai Futures Exchange.
In a brazen display of what can only be described as new found confidence and global stature, the giant Chinese oil company Sinopec International Petroleum Company has made a welcomed $7 Bn takeover bid for the Canadian oil and gas exploration company, Addax Petroleum — an international leader in its space — the companies announced Wednesday. The takeover, if successful, would give Sinopec access to Addax’s stakes in oil fields off the coast of West Africa, as well as in Iraq where the hard fought and hard earned resources are controled by the U.S. The merger could signal rising competition between the U.S. and China for global petroleum resources in Africa and the Middle East. Such a move could place upward pressure on oil futures.
Sinopec (Ticker: SNP), formally known as China Petroleum and Chemical Corp., is offering $52.80 (CAN), or about $46.12 (US), per share for the remaining common shares of Addax (Ticker: AXC). Sinopec already has eyes on Africa with oil interests in Gabon as well as Sudan. Its parent, Sinopec Group, is wholly owned by the Chinese government. The Addax board has recommended that shareholders accept the agreement, and senior executives have signed onto a lock-up agreement to sell Sinopec their 38 percent stake in the company.
Jean Claude Gandur, President & CEO of Addax, said in a statement announcing the deal that they were “pleased that Sinopec has recognized the highly attractive asset portfolio and exceptional team that we have assembled.” In a separate statement, Sinopec called the deal a “transformational transaction” that would help it expand in West Africa and Iraq, in line with its strategic objectives. The Chinese company said that Addax’s offshore deep-water exploration projects were especially promising for its growth and development. Sinopec agreed to a break-up fee of $300 Mn (CAN) if the deal falls through. Full documentation for the bid is expected to be submitted next month, and Addax, which is based in Switzerland but has shares listed in Toronto and London, will have 35 days to accept it. Addax shares closed at $45.65 (CAN) on Tuesday in Toronto. The Sinopec offer represents a 47 percent premium over what they were worth before the company announced it was in takeover talks early this month. Addax is also listed in London, where its shares rose 372 pence, or about 16 percent in morning trading after the deal was announced. In addition, China, and other U.S. competitors, will have greater access to Iraqi oil in the very near term. The Iraqi oil minister has already announced plans to privatize the Iraqi National Oil Reserves by auctioning off production interests. However, Iraq will maintain controlling interests in all such programs. Read more here.