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Canadians should be upset and insulted that China’s biggest grab for control of a major resource company anywhere in the world is the $15-billion Nexen deal. Clearly, China is testing whether this Boy Scout of a nation will roll over.
This is just one of many reasons why Canada must reject this takeover. Another is a warning by CSIS against foreign buyouts of strategic assets, and another is that polls show public opposition to the deal.
One compromise that’s been suggested is that the Nexen deal goes ahead but no more. That’s crazy. Canadians have no obligation to feed China’s appetite for resources just because it invited itself to dinner.
In addition, Canada has no obligation to Nexen shareholders, directors and management because they knew, or should have known, foreign transactions are always at the pleasure of Canadian governments. There should be no compromise and a turndown need not be difficult, won’t burn any bridges and can be done elegantly in this way:
1. The Chinese must be told this transaction is premature given that negotiations between Canada and China have just been announced to deepen the trading relationship and outline rules of engagement. This process will take years.
2. The buyer, CNOOC, should be told that it cannot buy control, but can own up to 20% of Nexen if it wishes. Foreigners taking small positions in transparent, Canadian-based public companies are not a problem.
3. The Chinese should be told the deal is premature because Canadians must have a national conversation about this. A Parliamentary committee, proposed by independent MP Peter Goldring, is a good idea and would study all the ramifications, and potential pitfalls, of allowing state-owned enterprises to invest and operate within Canada. Nexen will be studied as will Sinopec and the workplace accident that took place in Alberta three years ago and other cases.
4. China must realize that Canadians must evaluate properly the reasons behind the Canadian Security and Intelligence Service warning that stated “certain state-owned enterprises and private firms with close ties to their home governments have pursued opaque agendas or received clandestine intelligence support for their pursuits here.”
5. Ottawa should reiterate that Canada is open for business, but is a democracy and the people have spoken through polls that demonstrate enormous opposition to Nexen’s takeover by China.
6. Ottawa must instruct Chinese entities they cannot acquire control of Nexen or other resource and strategic assets on a collective basis either by, for instance, having five state-owned or state-controlled enterprises each buy 20% of something. This is a critically important point, and interlocking ownership by all state-owned enterprises from all nations must be disclosed and tallied on an ongoing basis.
For the rest of this article, please go to the National Post website: http://opinion.financialpost.com/2012/09/28/canada-should-be-open-for-business-but-not-at-any-cost/