Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.
OTTAWA, TORONTO, CALGARY — The federal government’s surprise move to block the $6-billion takeover of Progress Energy Resources Corp. is adding to growing concerns about a “Canadian discount” that weighs on share prices and frustrates companies’ ability to raise capital and do deals.
Investors reacted swiftly on Monday to the rejection of the bid for Progress by Malaysia’s Petronas . Progress shares dropped more than 9 per cent, while other energy shares sank sharply.
The government’s decision immediately reminded investors of previous high-profile deals in Canada that fell apart amid government or regulatory scrutiny, and has created uncertainty about the bid for Calgary’s Nexen Inc. by China’s CNOOC Ltd. The Conservative government created waves two years ago when it blocked BHP Billiton’s $38.6-billion (U.S.) attempt to acquire Potash Corp. of Saskatchewan. And just last week, the federal telecommunications regulator rejected BCE Inc.’s bid to acquire Astral Media Inc. in a shocking decision.
“We’re very confused,” by the Progress Energy situation, said Laura Lau, senior vice-president and portfolio manager with Brompton Group fund managers in Toronto.
“It’s been a very opaque process … We need to know what the rules are,” she said, adding the government’s decision “leaves a lingering bad taste in the market.”
Steve Letwin, chief executive officer of gold mining firm Iamgold Corp., said he is concerned that Ottawa appears to be putting up “roadblocks to foreign investment.”
That is a worrisome trend, he said, because “foreign companies will start looking at us and saying, well why do we want to spend the time and money trying to put capital in, if the government is just going to say no to it.” The message that is getting across to investors, he said, is that “we are not open for business as it relates to foreign investment capital.”
It is particularly bad for Canada to set this tone, Mr. Letwin said, because “we invest in other countries around the world and we expect them to have open doors. We have created a lot of wealth for Canadians by being able to do that.”
“There is no question that government involvement in energy deals has a chilling effect on investment,” said David Ross, chief financial officer of Calgary-based Bonnett’s Energy Corp. “It is pretty unexpected to see the government this involved in the allocation of capital.”
For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/report-on-business/blocked-petronas-deal-adds-to-canadian-discount-worries/article4629910/