China consistent endeavors to secure its supply and sources of natural resources and minerals has seen strategic moves for mergers and acquisitions, including bids for companies that operate in Africa. In keeping with this strategy, China’s oil giant Sinopec, a company fully owned by the Chinese government, has made a $7.22 bid to takeover Addax Petroleum. Addax has oil fields off the West African coast, and this would give China access to the oil produced in these fields. This would be over and above what China gets from Gabon and Sudan. Addax seems pleased with the takeover bid with its senior officials agreeing to sell their 38% stake that they hold in the company.
Addax is a Switzerland based company though it is registered in Canada. Canadian rules require government approval of large acquisitions, though it is not yet clear whether it is required for the Sinopec bid.
Addax has a time period of 35 days to accept the bid after which Sinopec will get charge of the African oil fields. Sinopec is using every opportunity to grab companies involved in exploring oil and China in general for other natural resources crucial for its growth and development to scale greater heights. Some of Sinopec’s previous attempts were foiled by political impediments, but it has been patiently waiting in the wings while stacking up its earnings to have considerable amount of cash to fund deals. These deals are also transforming Sinopec into a truly global company which will no longer be confined to refining oil, but have direct access to sources of oil overseas.
Addax oilfields include operations in Nigeria where militants pose a constant threat to oil drilling operations, but Sinopec has perhaps already figured out ways of operating in such risky places. The deal is particularly attractive since it is going to be the biggest acquisition of natural resources by any Chinese company. China also seems to be the only country with cash to spare and willing to make cash down payments for its acquisitions. Cash strapped companies desperate for an inflow of cash, need just that.
Source : China Africa
