Ottawa begins review of CNOOC's $15.1B takeover of Nexen

Ottawa has kicked off its review of China National Offshore Oil Co.'s $15.1-billion deal to buy Calgary-based Nexen Inc.

"I can now confirm that CNOOC has filed an application for review of its proposed acquisition of Nexen under the Investment Canada Act and I am conducting a review of the proposed investment," Industry Minister Christian Paradis said in an emailed statement Wednesday.

The review will take 45 days initially, but can be extended by 30 days or more.

In reviewing foreign takeovers, the minister must decide whether the deal would be of net benefit to Canada.

In announcing the friendly deal on July 23, the Chinese state-owned company vowed to make Calgary the headquarters of its North and Central American operations and to keep all of Nexen's employees and management.

The $27.50-per-share bid marked a 61 per cent premium over the Nexen's closing share price on the trading day before the deal was announced.

The agreement came after more than two months of negotiations between Nexen and CNOOC executives. Nexen twice rejected CNOOC's bid as too low before ultimately embracing the offer.

If successful, the deal would be China's largest-ever overseas acquisition.

Prime Minister Stephen Harper's Conservative government has rejected only two foreign takeovers in its six years in office, the most notable being the failed US$40-billion bid by Anglo-Australian mining firm BHP Billiton for Potash Corp. (TSX:POT) in 2010.

In 2008, the Tories blocked the $1.3-billion sale of Vancouver-based MacDonald, Dettwiler and Associates' space-technology division to an American company.

The Nexen offer has attracted attention south of the border, too, where U.S. Senator Charles Schumer has raised some objections.

Nexen is based in Calgary, but it has extensive offshore operations in the Gulf of Mexico. Schumer has said he's not opposed to the deal on principle, but that he wants his government to hold up the takeover as a means of pressing China on its trade policy.

Nexen and CNOOC were familiar with one another before the deal was announced. The two are partners in the Long Lake oilsands project near Fort McMurray, Alta., which has been beset by a litany of operational glitches and has yet to come close to meeting its production targets. The two companies are also partners in the Gulf of Mexico.

Nexen shares were flat at $25.11 in afternoon trading on the Toronto Stock Exchange on Wednesday.