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Nexen heard rumours of takeover interest in February

A security officer keeps watch outside the headquarters of China National Offshore Oil Corp. in Beijing.


The first rumblings that a bid might be made for Nexen Inc. reached the ears of the company's management team in February this year – back when the departing tracks of former-CEO Marvin Romanow were still fresh.

In July, while investors were still digesting the deal, Mr. Romanow's exit was thought to have made way for the takeover. And according to documents out Friday afternoon, that could certainly have been the case.

Oil giant Nexen has just announced a September shareholder vote to approve the friendly offer from China-based CNOOC Ltd., and along with those documents it also offered up the history of the $15.1-billion deal. The summary shows that along with anticipating an offer, the executives also had a good feeling the bid would come from a Chinese state-owned enterprise.

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For CNOOC, the gate to dealing with the Canadian company was already open at that time. Employees at both Nexen and CNOOC were in touch over matters related to joint projects in Alberta's Long Lake and the Gulf of Mexico.

At a price of $27.50 per share for Nexen, CNOOC is paying a 61 per cent premium over the stock price before July 23, but the documents reveal that it took several rounds of negotiations to get there.

Although the board discussed a potential takeover in theory – and sought the opinions of bankers from Goldman Sachs and RBC Capital Markets – it wasn't until May 17 that Yang Hua, vice-chairman of CNOOC, travelled to Vancouver to confirm with a non-binding letter his company's interest in a friendly takeover of Nexen.

Within that note, CNOOC requested exclusive negotiations, but after presentations and meetings, the team at Nexen decided it couldn't accept those terms at the price CNOOC named earlier. That led to a lot of back-and-forth between the companies and their advisers at the beginning of June. During this time CNOOC dropped its demand for exclusivity.

Then it was just down to the dollars, and working to supply CNOOC with the due-diligence materials it requested. The Chinese company twice had to raise its price to get the offer approved. Finally, in the early hours of Monday, July 23, 2012, the last touches were added to transaction documents, and the largest-ever Chinese foreign acquisition deal was announced before markets opened.

Days later, of course, there would be some drama when some shareholders were suggested to have gained $13-million trading on insider information. But at least the negotiations appear to have gone relatively smoothly for Nexen.

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