The Times was reporting on Wednesday afternoon that French oil group Total has decided against bidding for Nexen, the Canadian oil company. The decision follows a meeting of Total’s board in Paris yesterday, apparently.
We’re not 100 per cent sure whether that’s right. What we are sure of is that the briefings of analysts going on over the past 24 hours fall some way short of a full picture. Here’s our understanding:
- Total has been working on an acquisition of Nexen for months.
- A financial package aimed at providing up to $20bn was arranged last month.
- A meeting convened on Tuesday to consider the takeover was adjourned after some directors questioned whether it was wise to make a move before they had a proper idea of where the price of crude (now below $48) might settle.
- This is a sensitive issue, with Nexen’s cost of production sitting at around $26 a barrel.
- The Total board are due to meet again but we don’t know when.
- Societe Generale is co-adviser on the deal.
- The acquisition would be funded by a combination of internal cash resources and a bank loan, in the form of a so-called ‘club deal,’ with between four and six banks contributing $1.5bn apiece.
- In arranging the financing, Total has insisted that it must retain its credit rating of AA- from Standard & Poors.
- A plan exists to refinance the bank loan through either a debt offering once credit markets recover or a placement of what advisers refer to as “equity linked securities.” This is assumed to mean an offering linked to Total’s 13 per cent holding in drug company Sanofi-Aventis.
Or so we understand…
Reader beware, etc.
Related links:
Total set to consider offer for Nexen - FT Alphaville
Nexen chief to leave as rivals circle - FT
