Addax sale likely to pass reviews; Intel awaits foreign OKs; Xstrata queries Anglo investors

By Cristal Cody

Tupelo, Miss., June 24 - Addax Petroleum Corp.'s buyout for C$52.80 a share in cash by a Chinese firm is more than fair and should gain the necessary foreign government approvals, an analyst said in an interview Wednesday.

Meanwhile, Intel Corp. and Wind River Systems, Inc. told Prospect News on Wednesday that the chip and software makers are awaiting foreign regulatory clearances to complete Wind River's buyout.

In potential situations, Xstrata plc is feeling out investors of Anglo American plc for a sale, an analyst said Wednesday.

On Wall Street, stocks closed mixed with the broader markets gaining slight ground on Wednesday.

The Dow Jones Industrial Average slipped 23.05 points, or 0.28%, to 8,299.86.

The Standard & Poor's 500 index crept up 5.84 points, or 0.65%, to close at 900.94, and the Nasdaq Composite index gained 27.42 points, or 1.55%, to 1,792.34.

China scoops up Addax

Calgary, Alta.-based Addax Petroleum said Wednesday that it has agreed to a takeover by Sinopec International Petroleum Exploration and Production Corp. for C$8.27 billion.

The cash bid represents a 47% premium to the closing price of Addax shares on the Toronto Stock Exchange on June 5, the day prior to the oil and gas explorer's announcement that it was in preliminary deal discussions.

"The C$52.80 offer price is right where it needs to be and probably even higher than what shareholders thought," an analyst who asked not to be named told Prospect News on Wednesday. "From a valuation standpoint, it does look quite attractive."

Executives have agreed to tender their stock, which represents about 38% of outstanding Addax shares.

The deal must receive approvals from several governments, including the Government of the People's Republic of China.

Beijing-based oil and gas investor Sinopec is owned by the China Petrochemical Corp.

The deal includes a C$300 million termination fee if China does not give its approval by Aug. 24, according to a statement from Addax.

Sinopec plans to send out formal details for the takeover in early July.

Addax's oil and gas exploration and production is focused in West Africa and the Middle East and includes a joint operation in Iraq's self-ruled Kurdish region with Turkey's Genel Enerji AS oil company.

Regulatory requirements likely are dictated by Addax's production contracts in each country.

"Typically included in these contracts are provisions that if there's a change of control a regulatory body will have the ability to look at the proposed change to make sure the acquirer is competent," the analyst said.

Approvals are expected to be required by the Nigerian Senate and the Nigeria Department of Petroleum Resources as well as Kurdish regional government approval.

"It's a pretty high likelihood that Gabon would be the same structure, but no antitrust committees exist in those countries," the analyst said. "Typically, the ministries look at it from a competency standpoint, and Sinopec is extremely competent in our view."

Shares of Addax closed up C$3.31, or 7.25%, at C$48.96 on Wednesday. The stock has traded from C$12.13 to C$51.13 over the past year.

Governments examine Intel buy

Intel said Wednesday its proposed acquisition of Wind River Systems cleared the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

Intel initiated its cash tender offer for Intel shares on June 11 for $11.50 per share. The tender offer expires on July 9.

Wind River spokesman Bryan Thomas told Prospect News on Wednesday that the deal is awaiting several foreign regulatory clearances.

"We're still under review in Germany and Israel and also in Brazil," he said. "They're all standard."

Alameda, Calif.-based Wind River produces software for electronics, including smart phones, and operates in more than 15 countries.

Intel spokesman Nick Knupffer told Prospect News on Wednesday that the pre-merger filing in Germany is set to expire on July 6 and the Israel application is expected to expire on July 7.

"We also have a pending filing in Brazil and an upcoming post-close filing in Japan that will be made," he said. "The expiration of those countries' [reviews] is not a condition of the merger."

The deal is expected to close this summer.

A market source told Prospect News earlier this month that the transaction could get a hard look from regulators overseas since Santa Clara, Calif.-based Intel, the world's largest chipmaker, has a poor relationship with the European Union.

The European Competition Commission gave Intel a $1.5 billion fine in May over anti-competitive practices.

Wind River's stock rose 3 cents, or 0.26%, to close at $11.46 on Wednesday.

Intel shares added 29 cents, or 1.83%, to end at $16.10.

Xstrata presses for deal

Xstrata continued to push its case for a combination with Anglo American on Wednesday in a letter sent to the board.

Xstrata chief executive Mick Davis said in a statement that the two mining companies are a "natural fit and the most compelling major transaction available in our industry."

Xstrata also said the combination would provide more than $1 billion in annual synergies by the third year after the deal is completed.

London-based Anglo American's board rejected a preliminary overture from the Zug, Switzerland-based mining company on Monday.

Emiliano Leggieri, an analyst with Pali International Ltd., said in a research note released Wednesday that Xstrata is not expected to back off.

"Deutsche Bank, advisor to Xstrata, told us that Xstrata is at the moment contacting major shareholders of Anglo American with a view of engaging with them into discussions," Leggieri said. "Xstrata is now talking to Anglo's shareholders and could make a hostile offer directly to them if it gathers enough support for it."

Xstrata, though, has few liquid bargaining chips, he said.

"We believe that Xstrata will not be discouraged by Anglo's rejection and continue to engage with Anglo's shareholders," Leggieri said. "The most likely scenario remains the offer of more Xstrata shares, although dilution for Xstrata's shareholders is an issue. A cash sweetener is almost out of the question unless Xstrata divests assets like Anglo Platinum."

Shares of Anglo American closed up 10.17% at 1,820p, while Xstrata's stock rose 2.75% to end trading at 657.50p.

Mentioned in this article:

Addax Petroleum Corp. Toronto: AXC

Anglo American plc London: AAL

Intel Corp. Nasdaq: INTC

Wind River Systems, Inc. Nasdaq: WIND

Xstrata plc London: XTA

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.