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Canada Review of Nexen Bid Litmus Test: Canaccord’s Ballo

Canada’s review of Cnooc Ltd.’s $15.1 billion bid for Nexen Inc. is a “litmus test” for Canada’s willingness to accept Chinese investment, said Howard Balloch, 61, chairman of the Asian division of investment bank Canaccord Genuity Corp.

The Nexen-Cnooc approval process “will be seen in China as an indication of how open the Canadian economy is for major energy investments,” Balloch, a former ambassador to China, said today at the Bloomberg Canada-Asia Conference in Vancouver.

Canaccord advised on last year’s C$2.2 billion ($2.24 billion) takeover of Calgary-based oil and gas producer Daylight Energy Ltd. by China Petroleum & Chemical Corp.

Chinese companies are moving cautiously to increase their presence in Canada’s energy sector and are considering larger investments after Sinopec’s acquisition of Daylight, the “first 100 percent takeover,” said Wenran Jiang, 56, director of the annual Canada-China Energy & Environment Forum conference, at the Bloomberg summit.

“The Chinese are moving forward slowly,” Jiang said. “When the prime minister went to China in February actively courting Chinese investment, I think the signal was very clear to the Chinese that Canada is open for business, and some of the upper-scale investments could be accommodated.”

Review Period

Cnooc applied for Canadian approval of the deal on Aug. 29, setting in motion a 45-day review period that the federal government can extend for another 30 days to mid-November.

The government must review foreign takeovers with asset values greater than C$330 million to ensure they provide a “net benefit” to the nation.

Prime Minister Stephen Harper, speaking earlier at the Bloomberg conference, said the fact that Cnooc is a state-owned company is among a “range” of elements being considered in the review. Such ownership makes it “a different category under the act” and different from “genuine private” investments.

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