Oil and Gas

China's Sinopec to Acquire Addax Petroleum

Associated Press

Chinese refiner Sinopec agreed to acquire oil and gas exploration company Addax Petroleum in a deal valued at $8.27 billion Canadian (US$7.2 billion), gaining access to reserves in West Africa and the Middle East.

Oil Refinery

The wholly owned subsidiary of China Petrochemical will pay $52.80 Canadian (US$46.17) per share.

Geneva-based Addax, which previously disclosed it was in sale talks, said Wednesday its board has unanimously approved the deal, which is subject to regulatory approval. It is listed on exchanges in London and Toronto.

The takeover is the latest effort by Chinese energy and resource companies to expand and diversify overseas assets as Beijing seeks to secure scarce resources for the country's future growth.

Beijing-based Sinopec , whose formal name is China Petroleum & Chemical, is China's biggest refiner by capacity.

It urgently needs to expand its upstream international assets to help cushion against spikes in global crude oil prices that have caused it to post billions of dollars in losses in recent years due to caps on domestic fuel prices.

Addax's oil and gas exploration and production is based mainly in west Africa and the Middle East, including joint operation of the Taq Taq field in Iraq's self-ruled Kurdish region with Turkey's Genel Enerji.

The company reports it produced 134.7 million barrels a day of crude oil in the first quarter of this year.

The offer is a 47 percent premium to the closing market price on the Toronto Stock Exchange of Addax Petroleum common shares on June 5, the day prior to Addax's public announcement that it was in preliminary discussions with parties regarding a potential transaction.

"We are pleased that Sinopec has recognized the highly attractive asset portfolio and exceptional team that we have assembled at Addax Petroleum," CEO Jean Claude Gandur said in a statement.

"The efforts and accomplishments that Addax Petroleum has achieved thus far will be built on through increased investment in the business and acceleration of development and exploration plans."