Abu Dhabi's Taqa bids for Primewest

CALGARY. Alberta (Reuters) - Abu Dhabi National Energy Co TAQA.AD said on Monday it will buy Canada's Primewest Energy Trust PWI_u.TO for C$5 billion in cash, as the state-controlled firm makes good on plans to turn its new Canadian unit into a major oil producer.

It's the biggest acquisition to date and the third Canadian purchase since May for the three-year old Abu Dhabi firm, better known as Taqa. The price, C$26.75 per Primewest unit, is a 30 percent premium to the close on Friday and considered a rich bid by some analysts.

"It's a pretty big value that's being paid," said William Lacey, an analyst at FirstEnergy Capital Corp in Calgary. Taqa "doesn't seem to be short on cash".

The bid is just the latest move by players in the cash-rich Gulf states looking to diversify into North America.

Last week alone, Dubai's state-owned stock exchange struck a complex deal that could leave it with 20 percent stake in the Nasdaq Exchange (NDAQ.O) and Carlyle Group said it will sell a 7.5 percent stake in the private equity firm to an investment unit of the Abu Dhabi government for C$1.35 billion.

Buying Primewest more than fulfills a pledge that Taqa Chief Executive Peter Barker Homek made last month to spend $3 billion over 12 months boosting the output of its newly formed Canadian unit, Taqa North, to 100,000 barrels a day.

Once the purchase closes -- expected in late November -- Taqa will have gone from having no Canadian assets or oil and gas output four months ago to producing 111,000 barrels a day from assets worth $7.5 billion.

"When combined with previously announced ... acquisitions Taqa north will vault into the ranks of Canada's top 14 producers with proven and probable reserves in excess of 480 million barrels of oil equivalent," Barker Homek said on a conference call.

The company entered the Canadian market in May, agreeing to buy Pogo Producing Co's PPP.N Canadian oil and gas exploration unit for $2 billion. Last month it said it would acquire the Canadian assets of Pioneer Natural Resources Co (PXD.N) for $540 million.

Taqa, 75 percent owned by the Abu Dhabi government, plans to quadruple its assets to $60 billion in five years, and expects $20 billion of that to be in Canada. The Gulf state looks to use its oil revenue to diversify its holdings and Taqa plans more deals in Canada, Europe and elsewhere.

Barker Homek said Taqa could return to the Canadian acquisition market next year and also add heft and production by expanding its oil and gas exploration program on its new lands.

"Our strategy in Canada is for aggressive growth," he said. "At this point our focus remains on the conventional oil and gas market and coalbed methane. The other area we are looking to grow is in (power) generation and renewables, such as wind."

TRUSTS RISE

Primewest units jumped C$6.36, or 32 percent, to C$26.41, on the Toronto Stock Exchange on Monday. Nearly 32 million units traded, 70 times the normal volume.

Units in several of Primewest's rivals also rose on Monday, with Pengrowth Energy Trust (PWT_u.TO) posting a gain of 76 Canadian cents, or 4.4 percent, to C$17.98.

Unit values for the trusts have been under pressure since the Canadian government's decision last October to remove the sector's tax advantages by 2011. Some have also been hit by low natural gas prices.

In the past 12 months, units of Primewest, which focuses on gas, had fallen by about 30 percent.

Primewest said it will maintain its monthly distribution in October and November. The trust's board of directors has unanimously backed the sale.

Primewest has agreed to give Taqa two days to match any higher takeover offer and will pay the Abu Dhabi company a C$75 million break fee if the deal isn't completed.

($1=$1 Canadian)