When Politics Trump Logic

CNOOC's (CEO) handsome $15.1 billion offer for Nexen (NXY), a generous 61% premium on the latter's closing price on July 23, has already gained the approval of 99% of Nexen common shareholders. Yet, because CNOOC is a state-owned Chinese enterprise, it faces unique hurdles to winning regulatory approval from both the Canadian and American governments that may threaten to undo an otherwise attractive business deal.

The economic logic behind the acquisition seems sound, with Nexen shareholders set to realize a substantial premium on their ownership stakes and CNOOC gains. First, Nexen can serve as a launch pad for greater expansion into Western oil and gas resource. It also commands sophisticated technology, and it has expertise in extracting oil and gas from shale formations, tar sands, and deep water wells. Canada -- and, to a lesser extent, the U.S. -- would reap the positive effects of domestic investment in an atmosphere of slow economic growth....941 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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