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The federal government will take more time to review the proposed takeover of Nexen Inc. by CNOOC, China’s state-owned oil company.
Industry observers say the 30-day extension announced Thursday reflects the conflicting currents the Harper government is facing as it mulls the decision 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 and the guidelines on investment by state-owned enterprises,” Paradis said in a statement.
“The required time will be taken to conduct a thorough and careful review of this proposed investment.” CNOOC, or the China National Offshore Oil Company, has offered $15.1 billion for Nexen.
Nexen’s headquarters are in Alberta. It has assets in western Canada, including in the oil sands, but also has extensive holdings in the Gulf of Mexico, the North Sea and off west Africa.
Under Canadian law, the deal must be of “net benefit” to Canada in order to be approved.
Although most takeovers are approved, some high-profile deals have been turned down. The most recent deal to be rejected by Ottawa was the attempted takeover of Potash Corp. by BHP Billiton in 2010.
“That sent shivers through the international investment community,” said Walid Hejazi of the Rotman School of Management.
Stephen Harper’s Conservative government will have to treat this decision delicately, Hejazi said.
On one hand, it’s trying to encourage trade and investment, he said. At the same time, sentiment in the U.S. – Canada’s biggest trading partner – is suspicious of Chinese intentions.
The University of Calgary’s Jack Mintz agrees that the issue is a thorny one for the government, and says the time extension is a sign of the struggle.
“I don’t think they’re just dotting i’s and crossing t’s,” he said in an interview.
“If it was a slam dunk, it would have been approved, but I don’t think it is a slam dunk,” he said.
The government is probably still studying what guidelines or rules are needed on foreign ownership, he said.
Officials may also be debating exactly how to measure “net benefit,” he said.
And there may be some political considerations about when to announce the decision, he said.
Hejazi said that on balance, he thinks the deal should go through.
For the rest of this article, please go to the Toronto Star website: http://www.thestar.com/business/article/1270126–ottawa-extends-nexen-review-by-30-days