Canada Extends Cnooc-Nexen Review Period by 30 Days

Canada said it extended its review of Cnooc Ltd.’s $15.1 billion takeover of Nexen Inc. for 30 days to conduct a “thorough and careful” assessment.

Prime Minister Stephen Harper’s government is reviewing the bid, China’s largest ever foreign acquisition, under Canada’s foreign takeover law, which specifies transactions must have a domestic “net benefit” to win approval.

“Extensions to the review period are not unusual,” Industry Minister Christian Paradis said in an e-mailed statement today.

The government said Aug. 29 it had received Cnooc’s application. Under the law, Canada has 45 days to examine a deal and may extend that deadline by 30 days as long as it notifies Cnooc before the initial period expires. The government can extend the review further if Cnooc agrees.

“The proposed transaction is undergoing a rigorous review under the Investment Canada Act,” Paradis said in the statement. “The required time will be taken to conduct a thorough and careful review of this proposed investment.”

A 30-day extension would make Nov. 9 the next deadline for a government decision.

Margaux Stastny, a spokeswoman for Paradis, declined in an e-mail to confirm the deadline.

Cnooc doesn’t comment on the regulatory process, Steven MacKinnon, a spokesman for the company in Canada, said in an e-mail.

Nexen rose 0.4 percent to $25.75 in New York, the highest closing price since Aug. 22. Cnooc has offered to pay Nexen investors $27.50 a share.

Difficult Questions

China, the world’s second-biggest economy, is seeking greater access to Canada’s oil sands, the world’s third-largest pool of reserves, to support growth. While Harper has said selling more of the nation’s natural resources to Asia is a “national priority,” and that his government welcomes Chinese investment, he also said Oct. 4 the Cnooc offer raises a “range of difficult policy questions.”

Alberta Premier Alison Redford requested the federal government insist Calgary-based Nexen’s management and board remain at least 50 percent Canadian. The provincial government also wants Chinese state-owned Cnooc to maintain current employment levels for five years and keep capital spending plans intact, according to a person familiar with the matter who spoke last week on condition of anonymity.

Alberta’s government has indicated it would not object to the transaction if the conditions were met.

Workforce Pledges

As part of the proposal by Cnooc, details of which have not been made public, the Chinese company pledged 25 percent Canadian composition of its board, the person said. The company also said it would maintain Nexen’s workforce at no less than 80 percent of current levels for three years, they said, a commitment the Albertan government wants to extend by two years.

In announcing its offer July 23, Cnooc pledged to follow through on Calgary-based Nexen’s capital spending plans and maintain the company’s employment level and management, without giving details or a time frame.

Cnooc also promised to make Calgary the head office of its North American operations, as well as list its common shares on the Toronto Stock Exchange.

Cnooc is controlled by state-owned China National Offshore Oil Corp., which indirectly owns 64.4 percent of the company’s shares.

Foreign investment is crucial to promote Canadian growth, Finance Minister Jim Flaherty said in a Bloomberg TV interview in Tokyo today.

Investment Rules

“There’s lots of countries around the world which have investors who want to invest in Canada,” Flaherty said. “It’s important that we get our foreign direct investment rules clear.”

The New Democratic Party, the country’s biggest opposition party, on Oct. 4 called on the government to block the bid, saying the review process lacked transparency.

Canada’s 2010 rejection of Melbourne-based BHP Billiton Ltd.’s hostile $40 billion bid for Potash Corp. of Saskatchewan Inc. was one of only two acquisitions since 1985 to be blocked under the current law.

Opposition by Saskatchewan Premier Brad Wall to BHP’s bid foreshadowed the federal government’s rejection of that takeover.

Nexen’s oil and gas assets include production platforms in the North Sea, the Gulf of Mexico and in Nigeria, as well as oil-sands reserves at Long Lake, Alberta, where it already produces crude in a joint venture with Cnooc.

Nexen shareholders approved the bid on Sept. 20, with about 99 percent of those who voted casting ballots in favor.

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