CALGARY – The proposed $6 billion takeover of Canadian natural gas producer Progress (TSX:PRQ) by Malaysian state-owned energy giant Petronas has hit a potentially lethal snag.
After reviewing the deal, Federal Industry Minister Christian Paradis has given it the thumbs down. “I can confirm that I have sent a notice letter to Petronas indicating that I am not satisfied that the proposed investment is likely to be of net benefit to Canada,” Paradis said in a statement issued late Friday night.
The minister did not explain his decision, saying only that it was made after “a careful and thorough review of the proposed transaction.” Under the terms of the Investment Canada Act, Petronas now has up to 30 days to make any changes to the proposed deal and send it back to Ottawa for another review.
“Canada has a long-standing reputation for welcoming foreign investment. The Government of Canada remains committed to maintaining an open climate for investment,” Paradis said at the end of his statement.
At $6 billion, Petronas’ offer for Progress is substantial, but it’s eclipsed by the $15.1 billion China National Offshore Oil Co. is offering for Nexen (TSX:NXY).
And observers had been looking for signals from the review of the Petronas deal about the government’s thinking on the more controversial deal to buy Nexen Inc.
Both takeovers are by Asian state-owned players, are worth billions of dollars and sprang from joint-venture partnerships with Canadian firms, but the Chinese bid has stoked a great deal more political furor than the Malaysian one.
“China comes with more baggage, as befits a great power,” said Gordon Houlden, director of the University of Alberta’s China Institute.
Political scientist Wenran Jiang said the challenge for Ottawa will be to show consistency in how it applies the Investment Canada Act’s key net benefit test to foreign deals.
“They will have to appear that they use the same set of rules to evaluate, rather than using different tailor-made rules,” said the senior fellow at the Asia Pacific Foundation of Canada.
“They will have to show some seriousness as well as consistency.”
For the rest of this article, please go to the Canadian Press website: http://www.canada.com/business/Ottawa+sends+proposed+Petronas+Progress+deal+back+drawing+board/7421631/story.html