Canada gives extra time to Petronas and Nexen
The delays come as Canada considers new rules for state-controlled entities in the broader economy, including the energy sector
Canada’s regulatory authorities have extended the deadlines for a pair of high-profile takeovers by Petronas and China National Offshore Oil Corporation (Cnooc).
The government will now have an extra 30 days, until 10 December, to decide the fate of Cnooc’s C$15.1 billion ($15.11bn) offer for Calgary-based Nexen. Meanwhile, Petronas has resubmitted its C$5.1bn bid for Progress Energy. Its original offer was blocked by the government on 19 October, on the grounds the deal would not benefit Canada. The government will now make a decision by 30 November, although the review can be further delayed in 30-day increments for an additional 90 days.
The decision comes as Canadian officials ponder guidelines governing the role foreign state-run companies can take in the takeover of domestic firms in critical sectors, including energy and telecommunications.
Upon his return from a trade mission to China, Canada’s prime minister Stephen Harper signalled that the government will treat state-run companies differently for investment purposes. Under Canadian law, all foreign takeovers exceeding C$330 million must be approved by cabinet to be a net benefit to the public.
“We created guidelines specifically for state-owned enterprises because state-owned enterprises represent a different kind of player and obviously those are some of the issues that are before us today,” Harper told the Canadian American Business Council on 19 November.
Canada already has foreign ownership restrictions on large domestic oil-sands producers such as Suncor, which bought state producer Petro-Canada in 2009. Analysts speculate the new moves will increase restrictions on state-run companies without completely discouraging foreign investment altogether.
Yet it is not entirely clear what Canada wants from its overseas suitors, other than money. The Petronas deal reportedly fell apart on the issue of board representation and the appointment of independent directors.
Prior to his trip to China, Harper signed an investment treaty with China. Canada is also proposing a free trade agreement with nations in the Asia-Pacific region, including China.
Observers believe both deals will ultimately be approved. Nonetheless, foreign takeovers of Canadian firms remain politically sensitive, a fact the Chinese are acutely aware of. Speaking to the Canadian Broadcasting Corporation recently, China’s ambassador to Canada, Zhang Junsai said: “We’re here not to grab your resources. We’re here to participate.”