Sinopec Group to acquire Addax Petroleum for $7.2B

China's Sinopec International Petroleum Exploration and Production Corp. (SIPC) has agreed to acquire Calgary-based oil and gas exploration company Addax Petroleum Corp. for roughly $7.2 billion. The deal would represent the largest foreign acquisition ever by a Chinese company and reflects China's continued eagerness to obtain access to major energy resources - in this case concentrated in Addax's finds in West Africa and Iraqi Kurdistan.

A final agreement is expected to be filed by next week.

The takeover is expected to significantly increase China’s worldwide oil and gas holdings by giving them a stake in what some are calling one of the new "hot" oil exploration frontiers.

Sinopec intends to acquire all the outstanding common shares of Addax Petroleum by way of a negotiated take-over bid for C$52.80 per common share in cash.

SIPC is a wholly-owned subsidiary of China Petrochemical Corp. (Sinopec Group) and undertakes overseas investments and operations in the upstream oil and gas sector.

The agreement provides for, among other things, customary provisions relating to support of Addax Petroleum's board of directors, non-solicitation and right to match covenants in favor of SIPC and the payment to SIPC of a termination fee of C$300 million if the acquisition is not completed in certain specified circumstances.

SIPC has agreed to pay a break-up fee of C$300 million in the event that all approvals required to be obtained by SIPC from the Government of The People's Republic of China have not been obtained by August 24, 2009 and Addax Petroleum elects to terminate the Support Agreement.

In connection, AOG Holdings BV, a wholly-owned subsidiary of the Addax & Oryx Group Ltd., and Jean Claude Gandur, president and CEO of Addax Petroleum, have each entered into lock-up agreements with SIPC to tender their Addax common shares to the offer. Addax's other senior officers and directors will also enter into lock-up agreements. The total lock-up agreements represent roughly 38% of outstanding Addax Petroleum common shares.

RBC Capital Markets has acted as financial advisor to Addax Petroleum and provided an opinion that the consideration is fair. 

Addax Petroleum's Gandur commented, "We are pleased that Sinopec has recognized the highly attractive asset portfolio and exceptional team that we have assembled at Addax Petroleum. The efforts and accomplishments that Addax Petroleum has achieved thus far will be built on through increased investment in the business and acceleration of development and exploration plans. While Addax Petroleum will cease to be a publicly traded company, we look forward to continuing our business in the countries in which we operate for the benefit of all stakeholders."

Osler, Hoskin & Harcourt LLP is acting as legal counsel to the board of directors of Addax Petroleum. Canadian law firm Fasken Martineau LLP is advising Addax in the transaction. John Turner, who heads Fasken's global mining group, and Richard Steinberg, chair of the firm's securities and mergers-acquisition practice, are leading the 10-attorney team.

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