Anderson Exploration Ltd launched a friendly C$825-million ($546-million) bid for rival Numac Energy Inc yesterday, a deal aimed at giving Canada's fifth-largest oil and gas producer added output before it can tap prized Arctic reserves. In its second major acquisition in less than a year, Anderson offered C$8 a share in cash for Numac, a Canadian exploration and production firm majority owned by several Hong Kong interests led by tycoon Cheng Yu-Tung. Its stock had lagged its peers for several years.

If the deal - which comes amid a raft of takeovers in the Canadian oil patch - is completed as expected, Anderson would also assume Numac's C$135 million of debt, bringing the total value to C$960 million.

The offer represents a 25-percent premium to Numac's closing stock price on Wednesday. It has the backing of both boards and the major shareholders have agreed to tender their combined 62 per cent stake, Anderson said. Anderson's natural gas production was expected to grow by 28 per cent and its oil output by 42 per cent in fiscal 2001 when Numac's holdings are combined with its operations and after planned dispositions, Anderson added.

Anderson has banked much of its future on gas production from Canada's far north by assembling the region's biggest land position. But output from the rugged area is a few years off because a much-anticipated pipeline has yet to be built. "We try and grow this company through acquisitions and exploration and, as you know, we're way committed up north," Anderson Exploration chairman J.C. Anderson told Reuters.

"This just happens to be one of the acquisitions - gas and oil - and we see some considerable opportunities in their properties." Last May, Anderson bought Ulster Petroleum for C$512 million, topping a hostile bid from Dallas-based Hunt Oil Co.

Numac stock in Toronto surged C$1.50, or 23 per cent, to C$7.90 in heavy volume of almost 16 million shares yesterday. It had traded in a 52-week range of C$4.20 to C$6.85. Anderson's shares dropped 4 per cent, or C$1.25, to close at C$29.50, off their year high of C$35.70.

Peter Linder, analyst with Research Capital Corp in Calgary, said the deal was a good one and that Anderson's shares were being punished along with those of its rivals as the Toronto oil and gas subindex also fell nearly 4 per cent. "In very much of a seller's market, to get effectively a private company like this at this price makes a lot of sense," Linder said. "I think the market is overreacting."

Numac currently produces 110 million cubic feet of gas and 19,700 barrels of oil a day from proven reserves of 101 million barrels of oil equivalent. Its operating properties, located in Saskatchewan, central Alberta and northeastern British Columbia, are adjacent to many areas operated by Anderson.

Anderson said it expected to produce 803 million cubic feet of gas and 57,500 barrels of oil a day in 2001, after disposing of some interests valued at up to C$200 million. The sales and its rich cash flow were expected to fund the deal, it said. Numac, which came under control of the major shareholders in the early 1990s, has not been widely followed by analysts, and its stock has languished.

That has often led to speculation the Hong Kong interests, including Cheng's Fairview Development Ltd. and partners Bonelli International Ltd, Kortan Development Ltd and Teeman International Ltd, would sell. "I guess the only surprise is it didn't come earlier," Canadian energy commentator and publisher Ian Doig said. Anderson said the deal was contingent on two-thirds of Numac's shares being tendered. Numac agreed to pay Anderson C$35 million if the deal fell through.