Paula Dittrick
Senior Staff Writer
HOUSTON, Aug. 22 -- A unit of China National Petroleum Corp. has offered $4.18 billion for PetroKazakhstan Inc., Calgary, and the boards of both companies have approved the offer.
PetroKazakhstan's board recommended its shareholders accept the offer from CNPC International Inc. during a special shareholders meeting slated for October. Closing is expected by Oct. 15 pending necessary regulatory and court approvals.
The proposed transaction outlines a $125 million break-up fee that PetroKazakhstan would pay CNPCI, which has the right to match any other offer.
PetroKazakhstan's Pres. and Chief Executive Bernard Isautier said that he knew of no company preparing a bid that could rival the CNPCI offer. Under the CNPCI transaction terms, PetroKazakhstan is prohibited from soliciting other offers.
Isautier noted that PetroKazakhstan board is obligated to consider any competing bid and would have to recommend any superior proposal to shareholders if one materialized. His comments came during an Aug. 22 conference call with analysts, reporters, and investors.
"We view this transaction as solid. . .. We expect it to be completed," Isautier said during the conference call. He said that he did not foresee any right-of-refusal issues with the Kazakhstan government because the transaction involves stock.
Meanwhile, India's Oil & Natural Gas Corp. had expressed interest in buying PetroKazakhstan. ONGC executives told reporters in India on Aug. 22 that they have not ruled out the possibility of making a counter offer to the CNPCI offer.
Although based in Calgary, PetroKazakhstan's operations are in Kazakhstan. The company had been said to be a likely candidate for a bidding contest (OGJ, July 11, 2005, p. 26).
"Regarding other companies that might have expressed an interest in the company, we are subject to confidentiality agreements," Isautier said.
International M&A activity
Chinese companies are looking abroad to acquire more oil and natural gas assets. Chinese President Hu Jintao has visited Russia and Kazakhstan in search of access to more oil and gas (OGJ, July 11, 2005, p. 25).
In an unrelated deal that prompted international attention, CNOOC Ltd. withdrew its unsolicited offer for Unocal Corp., citing politics as the reason for ending a bidding contest between itself and Chevron Corp. (OGJ, Aug. 8, 2005, p. 29).
Unocal shareholders overwhelmingly accepted a cash-stock takeover bid from Chevron during a special meeting near Los Angeles. The transaction's final value, excluding debt, was $17.9 billion (OGJ Online, Aug. 1, 2005).
CNPCI offer
For PetroKazakhstan, CNPCI offered $55/share in cash. In addition, CNPCI agreed to also consider a proposal in which PetroKazakhstan incorporates a new oil and gas company to be spun off of PetroKazakhstan.
The proposed new company would seek oil and gas development opportunities in countries other than Kazakhstan, PetroKazakhstan said, adding that it still was too early to describe plans.
If PetroKazakhstan were to approve that suggestion, then it would be up to CNPCI to decide whether to accept the spinoff proposal. If CNPCI were to accept, then the Chinese company would pay PetroKazakhstan shareholders $54/share in cash and one share of the new company's stock for every existing PetroKazakhstan share.
Isautier said individual shareholders could elect how many shares in the proposed new company that they wanted. Some shareholders would be allowed to accept only cash if that is what they wanted.
This "mix-and-match" arrangement was set up because some shareholders might not be interested in the proposed new company, Isautier said.
Contact Paula Dittrick at [email protected]
