Canada has extended its review of Beijing-based Cnooc Ltd.’s $15.1 billion takeover of Nexen Inc. for a second time, re-setting the deadline to Dec. 10.
Prime Minister Stephen Harper’s government began its review of the bid for the Calgary oil and gas producer under the country’s foreign-takeover law after it was announced on July 23. On Oct. 11, Industry Minister Christian Paradis said he extended the review by 30 days.
“Extensions to the review period are not unusual,” Paradis said in a statement that was e-mailed late yesterday. “The proposed transaction is undergoing a rigorous review under the Investment Canada Act.”
“A determination will be made based on the six clear factors that are laid out in detail in section 20 of the Act band the Guidelines on Investment by State-Owned Enterprises,” Paradis said in the statement. “The required time will be taken to conduct a thorough and careful review of this proposed investment.” Under the law, Beijing-based Cnooc had to agree to the deadline extension.
Harper, who begins his third trip to Asia this year when he arrives in India tomorrow, has said he wants to rely less on a sluggish U.S. economy for exports and ship more energy to fast-growing Asian economies. Canada relies on exports for about one-third of its gross domestic product, with about three-quarters of its foreign shipments sent to the U.S.
Natural Resources Minister Joe Oliver has said the country’s biggest resource projects will require nearly C$650 billion ($653 billion) of investment to develop over the next decade. Harper has said he would clarify Canada’s foreign investment rules in a “policy framework” to be released when the government decides on the Cnooc’s bid -- the largest foreign acquisition by a Chinese company.
Paradis blocked a C$5.2 billion bid by Petroliam Nasional Bhd. for Calgary-based Progress Energy Resources Corp., issuing a statement minutes before midnight on Oct. 19 in Ottawa that said the transaction didn’t represent a “net benefit” for the country. It was only the third time Canada has blocked an acquisition under its foreign-takeover law since the legislation took effect in 1985. Petronas, as Malaysia’s state-owned oil company is called, was given 30 days to appeal or make concessions.
Peter Hunt, a Calgary-based spokesman for Cnooc, declined to comment. Phone calls placed to Cnooc headquarters seeking comment weren’t answered. Nexen spokeswoman Patti Lewis was not immediately available at her office outside business hours.
Shares of Nexen closed at $24.64 in New York yesterday, 10 percent below Cnooc’s offer price of $27.50, suggesting investors are uncertain the deal will be completed.
Harper has said Canada’s trade and investment with China should be more balanced. “The Chinese are acutely aware, in my own experience, of the fact the trade and investment flows are disproportionately in their favor,” Harper said in an interview with Bloomberg Television’s Erik Schatzker Sept. 6. “They recognize that has to change,” he said, adding “we will also be seeking things from them.”
Harper has also said he knows that many Canadians are uneasy about deals such as Cnooc’s. Fifty-eight percent of Canadians believe the government should block the Nexen takeover, according to an online poll of 1,000 people taken Oct. 10 to Oct. 11 by Angus Reid Public Opinion. The main opposition in Parliament, the New Democratic Party, has opposed the bid.
Beijing-based Cnooc has already made several commitments to Canada to win support for the Nexen sale. These include listing its shares on the Toronto Stock Exchange, establishing Calgary as its base for North and Central America and maintaining Nexen’s employment levels and capital spending program.