TORONTO (CP) -- The Ontario Securities Commission is probing trades in the shares of Nelson Resources Ltd. ahead of a takeover offer by Russian energy giant Lukoil.
Nelson disclosed Wednesday that the regulator has told the company the investigation was prompted by the announcement of the Lukoil transaction on Sept. 30.
An OSC spokesman would confirm only that trading in the company's shares is under investigation.
Nelson, a Bermuda-domiciled, TSX-listed oil company active in Kazakhstan, announced Sept. 30 it had agreed to negotiate with Lukoil on a $2-billion offer.
In the month before that announcement there was a spasm of stock-option exercises and share sales by Nelson insiders led by president and chief executive Erdinc (Nick) Zana.
The companies announced a definitive agreement on Oct. 13, valued at $2.19 US per share, or C$2.56 at current exchange rates - 13% below Nelson's market price before the transaction was made public.
Nelson reported Oct. 19 that Lukoil had acquired 65% of Nelson's common shares from its principal foreign institutional shareholders.
Nelson, formerly a Canadian-headquartered gold company, has called a Dec. 2 meeting of shareholders - some of whom expressed outrage over the deal during a conference call on Oct. 3.
''I welcome an investigation of all of the trading activity that occurred prior to Lukoil's approach,'' Zana stated Wednesday.
''We have presented information to the OSC on this matter and will continue to fully co-operate with the OSC in its investigation,'' added Zana, who was told by a shareholder in the Oct. 3 conference call that management ''must be nuts to sell this company for this price.''
Nelson Resources shares [TSX:NLG], worth C$2.25 in mid-August, spiked to the C$3 level - their highest price in almost a decade - on Aug. 24 and remained near C$3 until Sept. 29, when they closed at C$2.96 on the Toronto stock market.
On Sept. 30, after the announcement of the tentative Lukoil deal, the stock dropped 10% to C$2.67. It traded at C$2.40 near midday Wednesday, unchanged on the day.
According to insider-trading filings, Zana exercised one million options at C67 cents on Sept. 2, selling the shares the same day at C$2.85 to clear almost C$2.2 million.
He made similar but smaller transactions involving 50,000 shares on Sept. 6 and 24,600 on Sept. 7, then on Sept. 15 exercised 925,400 options at C67 cents and sold those shares at C$2.8177 to clear almost C$2 million.
Five other Nelson directors or officers also undertook sizable option exercises and stock sales during September, ranging from 300,000 shares to two million.
Nelson Resources, formerly Nelson Gold Corp., raised financing on the Toronto Stock Exchange for a gold project in central Asia before being transformed in 2000 into an oil producer in Kazakhstan.
It was the second Canada-related energy company in Kazakhstan subjected to a multibillion-dollar takeover bid in as many months.
An Alberta court has approved the $4.2-billion takeover bid for PetroKazakhstan Inc. by China National Petroleum Corp. - China's biggest offshore acquisition yet.
Calgary-based PetroKazakhstan said it was ''pleased'' with the decision handed down by the Alberta Court of Queen's Bench in a China-Russia tug of war over the Canadian company, all of whose operations are in the central Asian republic of Kazakhstan.
PetroKazakhstan said it would close the deal Wednesday, ''as soon as possible after the order has been filed with the court.''
The court ruling quashed a bid by Russian oil giant Lukoil to delay the offer from China's largest oil company. Lukoil argued that it had right of first refusal to buy PetroKazakhstan's stake in Turgai Petroleum, a joint venture holding one-fifth of the Canadian company's reserves.
The Russian company, whose joint-venture relations with PetroKazakhstan have been increasingly unpleasant, said Tuesday it would match the Chinese offer if the Alberta court declined to approve the China National Petroleum Corp. transaction.
PetroKazakhstan stockholders voted 99 per cent on Oct. 18 to accept CNPC's offer of $55 per share in cash.
The company, formerly Hurricane Hydrocarbons, has been working in Kazakhstan for eight years and owns a major refinery as well as oil reserves estimated at 550 million barrels.
The purchase by a unit of state-owned China National Petroleum is seen as a coup for Beijing in its effort to secure energy supplies for the booming Chinese economy.
China has been acquiring other oil and gas assets in Sudan, Venezuela and Australia, and PetroKazakhstan enables it to tap Central Asian oil.
A pipeline between the two countries is under construction.
CNPC's purchase follows a failed bid by China National Offshore Oil Corp. to buy California-based Unocal Corp. in the face of opposition from American politicians.
China's biggest foreign acquisition to date has been Lenovo Group's $1.75-billion purchase of International Business Machines Corp.'s personal computer business earlier this year.
(c) The Canadian Press 2005