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A deal for Nexen could spark a wave of mergers and acquisitions by companies such as Royal Dutch Shell

Nexen shares lifted 10% on speculation about takeover

By Carola Hoyos in Cairo

Published: November 27 2008 02:00 | Last updated: November 27 2008 02:00

Shares in Nexen, the Canadian oil company, yesterday rose as much as 19 per cent, on speculation it would be taken over by a bigger rival, most likely Total of France.

Nexen at one point yesterday was trading as high as C$23.93, before retreating to close at C$22.28, up more than 10 per cent on the day.

The company was again at pains to state that it was not for sale. However, banking sources and people within the oil industry expect it will be targeted by a large oil group rich in cash but struggling to expand its production.

The Financial Times last month revealed that Total was seriously considering a bid after Nexen’s shares lost more than half their value in the stock rout sparked by the credit crisis.

Total would not comment last night.

Total examined Nexen last year but concluded it was too expensive. A banker close to Total Capital, an arm of Total, was reported by Reuters as saying the group planned a €1bn (US$1.3bn) five-year bond to finance a deal.

Oil companies dislike hostile takeovers but bankers have not ruled out such a move in this case, suggesting Lazard might be working with Total on a deal.

Nexen missed its production targets last year and its Long Lake oil sands project has been delayed. However, analysts said the company had good cash flow and assets, including a 7.23 per cent stake in the Syncrude venture, fields in the Gulf of Mexico and the North Sea, and shale gas.

A deal for Nexen could spark a wave of mergers and acquisitions, analysts said, pointing out that several US companies, such as Anadarko, Marathon and the UK’s BG were being eyed by companies such as Royal Dutch Shell, Eni and other larger rivals.

This month Statoil announced a US$3.4bn deal to take a stake in assets owned by Chesapeake Energy, the Oklahoma-based gas company.

But bankers and analysts are expecting bigger deals, including takeovers of companies many of which are now trading at a significant discount to the sum of their assets.

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