Management at Canada's PetroKazakhstan
PetroKazakhstan will be selling out to China's CNPC, the parent company of PetroChina
The deal looks pretty reasonable from a valuation standpoint. Not only is the price offered a 21% premium to Friday's close, but CNPC will also be paying about $12 per barrel of proven reserves -- more than a 15% premium to the recently completed Chevron
There is a further twist to this deal that I find interesting. CNPC is considering a proposal from PetroKazakhstan management to create a spinoff company that will be funded with $1/share in cash, or about $76 million. This spinoff would then seek new oil and gas development projects throughout Central Asia -- though not in Kazakhstan. Should CNPC go through with this plan, investors would have the option to receive $54 in cash and one share of the new company for each share of PetroKazakhstan, with a pro-rata system put in place for those who'd rather have the extra dollar.
As the recent Chevron, Unocal, and CNOOC
This deal seems to have a good chance of acceptance. China and Kazakhstan are generally on friendly terms, and China should become a major consumer of Kazakh energy in the years to come. So while the Kazakh government will almost certainly exercise its right to review the deal, I wouldn't imagine it would balk at Chinese ownership of these assets.
It's been a long, strange run for PetroKazakhstan and its shareholders. Long-term investors got a nice cash return on their patience, and who knows whether the potential spinoff could become another PetroKazakhstan in the future?
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