Ottawa approves $15B Chinese takeover of Nexen
Published Friday, December 7, 2012 3:39PM EST
Last Updated Friday, December 7, 2012 10:33PM EST
The federal government has approved two multi-billion-dollar takeovers of Canadian oil and gas companies by state-owned Asian enterprises, but Prime Minister Stephen Harper has made it clear that such deals will only be allowed under “exceptional circumstances” in the future.
Harper gave the green light Friday to the controversial $15.1-billion takeover of Calgary-based Nexen Inc. by the China National Offshore Oil Company.
Ottawa also approved Malaysian state-owned company Petronas’s $6-billion purchase of Alberta’s Progress Energy.
However, Harper said those acquisitions are “the end of a trend,” rather than a beginning.
“When we say that Canada is open for business, we do not mean that Canada is for sale to foreign governments,” he said at a news conference.
The Nexen and Progress deals were deemed to have a significant economic benefit to Canada, but from now on, bids by state-owned foreign companies on our oilsand businesses will only be considered in “exceptional circumstances,” Harper said.
Any more foreign hands in Canada’s lucrative natural resource sector would not benefit the country, he said, noting that only 15 companies operate in the oilsands.
Harper said his government has been concerned for some time that “a series of large-scale controlling transactions by foreign state-owned companies could rapidly transform (the oilsands) industry from one that is essentially a free market to one that is effectively under control of a foreign government.”
But, “there is an awful lot of room between those two extremes,” Harper told reporters.
“I don’t want to exaggerate the balancing act,” he said, noting that Ottawa has taken steps to address Canadians’ concerns.
In major changes to policies under the Investment Canada Act, all state-owned enterprises looking to buy Canadian companies will face greater scrutiny, Harper said.
The threshold for a government review of a takeover by foreign private investors has also been increased to $1 billion from $330 million, so that Ottawa can focus on big proposals.
However, the $330-million threshold will remain in place for state-owned companies.
In a news release, the government said Industry Minister Christian Paradis will “continue to carefully monitor SOE transactions throughout the Canadian economy.
“In particular, the minister will closely examine: the degree of control or influence a state-owned enterprise would likely exert on the Canadian business that is being acquired; the degree of control or influence a state-owned enterprise would likely exert on the industry in which the Canadian business operates; and the extent to which a foreign state is likely to exercise control or influence over the state-owned enterprise acquiring the Canadian business,” the release said.
Harper’s announcement came three days before the deadline to make a decision on the Nexen deal.
The China National Offshore Oil Company made a friendly bid in July, sparking debate in the industry sector and on Parliament Hill over whether firms run by foreign governments have a place in Canada’s natural resource industry.
Many critics also have concerns about national security issues and China’s poor record when it comes to labour rights.
The Canadian Security Intelligence Service has expressed its fears over foreign investment by state-owned companies, although it did not single out specific countries as potential threats in its annual report.
But Harper said that all deals involving foreign companies, regardless of whether they are state-owned or not, are subject to a national security test.
Ottawa also said non-controlling foreign interests in Canadian businesses “will continue to be welcome.”
Harper said Canada will continue to aggressively seek out and attract foreign investments because of its reputation as a stable economy and an “unprecedented regard for the rule of law.”
Alberta Premier Alison Redford, who supported the takeover bids, welcomed Harper’s announcement.
“The benefits are great, and any issues can be mitigated," she said in a statement.
But NDP natural resource critic Peter Julian accused the Conservatives of “trying to sugar-coat…a rather bitter pill,” saying the public should have been consulted on the Nexen and Progress bids.
"This is a farce. While Conservatives admit that under the new rules this transaction is not a net benefit to Canadians, they have approved it anyway," he said.
Harper announced the takeovers after the markets closed Friday afternoon, but Nexen and Progress shares fell as soon as news broke that he was about to deliver a decision.
Nexen shares fell by about six per cent to $23.29 and Progress shares dipped by about four per cent, closing at $19.37 on the Toronto Stock Exchange.
With files from The Canadian Press