OTTAWA – The federal government on Friday gave the thumbs-up to two takeovers of Canadian companies by foreign state-owned companies, while setting new rules that could make such transactions rarer in the future.
China’s CNOOC Ltd. was given the green light on its US$15.1-billion takeover of Calgary-based Nexen Inc., while Malaysia’s Petronas is being allowed to buy Progress Energy Resources Corp., also based in Calgary, for $6 billion.
Industry Minister Christian Paradis said both proposals passed the test, under the Investment Canada Act, for being of “net benefit” to Canada.
However, the government simultaneously announced measures that would put such transactions under tougher scrutiny in the future, particularly the deal for Nexen because that involves an oilsands producer. Progress is a natural gas firm.
“The government’s concern and discomfort for some time has been that very quickly a series of large-scale and controlling transactions by foreign state-owned companies could rapidly transform (the oilsands) industry from one that is essentially a free-market industry to one that is effectively under the control of a foreign government,” Prime Minister Stephen Harper told reporters on Parliament Hill after the decisions were released late Friday afternoon.
He said the Canadian oilsands represents 60 per cent of the world’s oil production that is not under state control.
The government announced Friday that, going forward, any proposal that puts control of a Canadian oilsands company in the hands of a foreign state-owned enterprise would be viewed as being of net benefit to Canada “on an exceptional basis only.”
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As for takeover attempts in general by foreign government-owned firms, such proposals will now be carefully considered by government for how much control the state-owned enterprise would exercise over the Canadian firm sought, the degree of influence the foreign firm would have on the industry in question and the extent to which the foreign state is likely to control the firm making the acquisition attempt.
The government said it is raising the value threshold for foreign takeovers involving private-sector companies that warrant a review by the government to $1 billion over the next four years, while the trigger for vetting proposals involving state-owned enterprises would remain $330 million.
Harper was asked if he is sending mixed messages while approving two major deals involving foreign state-owned firms, while at the same time establishing new rules that would curtail them in the future.
“The transaction today does not, in our judgment, raise the concern that we are transforming the nature of the oilsands,” he said. “That’s why the minister of industry did approve the transaction today.
“But we are increasingly uncomfortable with the trend. The trend has been a trend in the oilsands – and to some degree elsewhere – towards proposals by state-owned enterprises that are increasingly large, that increasingly involve direct control of the state-owned enterprise over the Canadian company, and that these transactions are increasingly proposed by state-owned enterprises that are, in our judgment, fairly directly controlled by and influenced by the foreign government in question.”
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The government says the proportion of transactions subject to a review under the Investment Canada Act that involve state-owned companies rose to more than 20 per cent as of 2011 from a “marginal percentage” in 2008.
Harper said that after “years (of) reducing the ownership of sectors of the economy by our own governments,” he is not interested in seeing them “bought and controlled by foreign governments instead.”
For both takeovers approved on Friday, Paradis cited “significant commitments to Canada” from CNOOC and Petronas “in the areas of: governance, including commitments on transparency and disclosure; commercial orientation, including an adherence to Canadian laws and practices, as well as free-market principles; and employment and capital investments, which demonstrate a long-term commitment to the development of the Canadian economy.”
NDP energy critic Peter Julian was dismissive of the government’s actions, saying there should have been consultations with Canadians.
“Today they’re trying to sugar-coat something that I think will be a rather bitter pill,” he said.
Canada’s spy agency raised a red flag on foreign investment by state-owned firms in its annual report earlier this year.
Though CSIS didn’t name specific countries or companies, it said certain state-owned enterprises have pursued what it called opaque agendas or received clandestine intelligence support for their pursuits in Canada.
Harper said all foreign acquisition attempts – no matter what their value is or whether they involve private or government firms – are reviewed for potential threats to national security.
With files from The Canadian Press
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