Author Topic: NXY - Nexen  (Read 4477 times)

Aberhound

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NXY - Nexen
« on: July 24, 2012, 09:35:56 AM »
Dazel posted this link elsewhere so I created a new thread.

http://www.bloomberg.com/news/2012-07-24/nexen-given-top-return-on-bet-canada-clears-bid-real-m-a.html

The discount is about 6% to the deal price. The article says approval needed in Canada, US and EU.  It looks to me like the Inco deal in that it will be approved because the slowdown suggests a lower oil price and the Canadian authorities want the injection of capital and I bet the terms require mostly Ontario built plant. It looks like CNOOC is overpaying like Vale overpaid for Inco and Rio Tinto overpaid for Alcan. There is also a massive loss to GDP if the Bitumin glut is not resolved by export. The US should approve to favour Halliburton which is building Gateway. I don't understand why the EU could stop the deal. Sell the North Sea assets if necessary.

Why would anyone oppose the export of bitumin to let the pollution from refining occur in China where the oil is consumed. Let them pay the externalities and you might as well let them take the risk. Its not like there is a shortage of oilsands to process, the limiting factor is lack of capital and lack of willingness to take the price and regulatory risks. Exxon wouldn't pay this much and who else has enough capital to bear this amount of project risk?


longlake95

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Re: NXY - Nexen
« Reply #1 on: October 24, 2012, 01:39:54 PM »
I've decided to arb NXY @ 23.77, after energy stocks tanked, when Ottawa killed ( deal can still close if these parties tweak deal to meet net-benefit test ) the Petronas-Progress deal.

The Nexen deal will likely close as:

1) CNOOC's international HQ will be in Calgary - with exec jobs staying in Calgary
2) CNOOC intends to list on TSE
3) Harper wants increased trade with China and this deal would send a good signal - Think airplanes, coal, LNG, Lumber, Insurance, etc.
4) Only 28% of NXY's production is in Canada - not strategic


With a $27.50 USD cash offer, you're looking at a 31% ( give or take a little ) annualized ROR.




ItsAValueTrap

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Re: NXY - Nexen
« Reply #2 on: October 24, 2012, 02:41:25 PM »
It comes down to predicting the intentions of the politicians right?  A lot of the time, they do things that don't really make sense.

Honestly, I don't see what the problem with foreign ownership is.  If they do something bad, I don't think that Canadians will have a problem with nationalizing assets.  I don't think we should do that, but we have the option and it will keep foreigners honest.  On top of that, Nexen is probably run by some really smart people who have a history of selling their company at ever higher prices (e.g. the constant equity raises).  If anything, it's the foreign buyers who need protection against us.

On the political side, I think the politicians want to create the impression that they are "protecting" Canada against evil foreigners who want to own Canada.  They did this when they blocked the bid for Potash... though that deal was a little different because it was a hostile takeover and Potash management (who have skin in the game and own Potash shares) really did not want to be taken over.  I don't see how the Nexen deal will be a slam dunk... I have no special edge in predicting the idiocy of politicians.
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matts

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Re: NXY - Nexen
« Reply #3 on: October 24, 2012, 03:41:49 PM »
I also put on this arb trade after the Progress news. It's a bit of a "gut feeling" trade so I didn't put much behind it. But basically my thesis is that the market was surprised and a bit concerned by the blockage of the Potash deal. The market reaction on Progress was much more forceful. The investment community is openly and in a hostile manner pointing out that this is just very bad for Canada and the future. I think this will cause the government to reconsider and let a couple of the next ones "through" to avoid looking like the official stance is to block. Especially with CNOOC as we have stated that we want to export more energy to China. Again I am speculating based on my intuition so I definitely wouldn't bet the farm here. Governments can do really stupid things.
« Last Edit: October 24, 2012, 09:48:23 PM by matts »

ECCO

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Re: NXY - Nexen
« Reply #4 on: October 24, 2012, 06:57:57 PM »
It comes down to predicting the intentions of the politicians right?  A lot of the time, they do things that don't really make sense.

Honestly, I don't see what the problem with foreign ownership is.  If they do something bad, I don't think that Canadians will have a problem with nationalizing assets.  I don't think we should do that, but we have the option and it will keep foreigners honest.  On top of that, Nexen is probably run by some really smart people who have a history of selling their company at ever higher prices (e.g. the constant equity raises).  If anything, it's the foreign buyers who need protection against us.

On the political side, I think the politicians want to create the impression that they are "protecting" Canada against evil foreigners who want to own Canada.  They did this when they blocked the bid for Potash... though that deal was a little different because it was a hostile takeover and Potash management (who have skin in the game and own Potash shares) really did not want to be taken over.  I don't see how the Nexen deal will be a slam dunk... I have no special edge in predicting the idiocy of politicians.

I think the politicians want to create the impression that they are "protecting" Canada against evil foreigners who want to own Canada

That might be one of the reason, but I think the problem is more for Canada to keep good relations between China and USA. On one side, China will get mad at being block (like with Potash) everytime they want to buy someting canadian. On the other side, USA dont want Canada to sell his energy to China or other country, if USA could have been the sole buyer of canadian oil it would have been better for them.

I think the deal with China will pass, but would not bet on that. I agree that its betting on a political descision,that's not investing, we could call that politicgambling.


alertmeipp

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Re: NXY - Nexen
« Reply #5 on: December 07, 2012, 08:56:50 PM »
Deal got approved.
Nice arb.
No position for me.

siddharth18

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Re: NXY - Nexen
« Reply #6 on: December 07, 2012, 10:42:09 PM »
Wow. Congrats  ;D

longlake95

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Re: NXY - Nexen
« Reply #7 on: December 08, 2012, 04:32:42 AM »
Thanks, it would nice to have one or two arbs like every year.  :D

Hielko

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Re: NXY - Nexen
« Reply #8 on: December 08, 2012, 07:35:10 AM »
Followed this deal closely, but never invested because I couldn't really figure out the political risk. I'll add this to my long list of missed opportunities :P

Interesting market action just before the close yesterday...