China's petrochemical giant is set to purchase oil and gas exporter Daylight Energy for $2.1bn
As part of an increasing effort to secure overseas energy, Sinopec International Petroleum Exploration and Production Corp (SIPC) has signed a deal to buy Calgary, Alberta-based Daylight for C$10 per share, more than double it's previous closing price of C$4.6.
Sinopec hopes to export liquefied natural gas from western Canada and increase its presence as a major investor in Canadian energy. The $2.1bn deal is still awaiting approval from shareholders, as well as from the Chinese and Canadian governments.
Chinese buyers have been taking advantage of low stock prices and a difficult fundraising environment to make deals, as a combination of debt and a slump in oil prices lead investors to speculate there will be little growth in the Canadian energy sector.
It is still unknown whether or not the Sinopec purchase will face review under the Investment Canada Act, which determines whether or not deals involving domestic firms will be beneficial to Canada.
At the start of the year, China's National Development and Reform Committee (NDRC) strongly backed overseas investments and acquisitions and have since stepped up global investments, including CNOOC's purchase of struggling Opti Canada Inc for $34m and $2bn in debt. So far this year, China has conducted $26bn in outbound energy and mining deals. However, some anxiety still remains that some major SOEs are mismanaging overseas investments.