Canada to take more time on CNOOC takeover

AP News
Posted: Nov 03, 2012 1:13 AM
Canada to take more time on CNOOC takeover

TORONTO (AP) — Canada is taking more time to review Chinese state-owned CNOOC's takeover bid for Canadian oil and gas producer Nexen. It would be China's biggest overseas energy acquisition.

Industry Minister Christian Paradis said in a statement Friday evening that the review of the proposed $15.1 billion purchase has been extended by 30 days until Dec. 10.

Extensions under the Investment Canada Act are not unusual, Paradis said. It's the second time the review has been extended.

The Canadian government is in the process of studying whether the deal represents a "net benefit" to the country. The review decision is expected shed light on Canada's policy toward foreign takeovers, particularly when the foreign company is owned by the state.

Concerns have been raised by some Canadian lawmakers about a takeover by a state-owned Chinese firm. The Canadian Security Intelligence Service, Canada's spy agency, also raised a red flag on foreign investment by state-owned firms in general in its annual report this year.

CNOOC and other big state-owned Chinese energy companies have increased purchases of oil and gas assets in the Americas as part of a global strategy to gain access to resources needed to fuel China's economy. State-owned Chinese energy companies have moved carefully since CNOOC tried seven years ago to buy Unocal but was rejected by U.S. lawmakers citing national security fears.

Canadian Prime Minister Stephen Harper's government turned down Malaysian state-owned oil firm Petronas' $5.2 billion takeover bid for Canadian gas producer Progress Energy last month. The government did not publicly explain the decision to block the deal but said a new policy framework for foreign takeovers will be released soon. Petronas has said it will resubmit another bid with the hopes it will win approval.

That decision has raised doubts about whether Canada is open to foreign investment.

Harper's Conservative government also rejected Anglo-Australian BHP Billiton's hostile takeover bid for Potash Corp. in 2010 and the sale of Vancouver-based MacDonald, Dettwiler and Associates' space-technology division to an American company in 2008.

But Harper has lobbied the Chinese to invest in Canada's energy sector and has said foreign investment is needed to develop Canada's vast oil and gas deposits. Turning down CNOOC's bid would harm relations with China.

Some analysts say the CNOOC-Nexen deal will likely be approved because more than 70 percent of Nexen's assets are outside Canada.

Nexen, a mid-tier energy company in Canada, operates in western Canada, the Gulf of Mexico, North Sea, Africa and the Middle East, with its biggest reserves in the Canadian oil sands. It produced an average of 213,000 barrels of oil a day in the second quarter of this year.

Nexen's board approved the takeover in July after CNOOC offered a 62 percent premium on the stock price. Shareholders voted overwhelming to support the deal in September.

In an apparent show of commitment to Canada's interests, CNOOC is pledging to set up a regional headquarters in Calgary, Alberta, where Nexen is based. It also says it will keep the Canadian company's management and projects in place and list shares on the Canadian bourse in Toronto.