Conservatives work to clarify foreign takeover policy – by Steven Chase and Shawn McCarthy (Globe and Mail – October 24, 2012)

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 — The Harper government is sharpening its policy on takeovers by foreign corporations to single out firms controlled by other governments and set more detailed conditions they must meet before Ottawa would approve a deal, sources say.

Under rising pressure to clarify Canada’s rules on foreign takeovers, the Conservatives are trying to strike a balance between attracting foreign investment to develop Canada’s natural resources and concerns about the objectives of powerful state-backed firms from China, Russia and elsewhere that have deep pockets and big appetites for resources.

Senior government sources offered the most detailed sense yet of what the Conservatives are considering.

At its heart would be a more sharply delineated, two-track system for judging whether a foreign takeover provides a “net benefit” – one track for transactions with typical corporations and another track for firms under the influence of foreign governments.

“The government is working its way toward clear criteria for applying the net-benefit test to proposed acquisitions by state-owned enterprises,” a government source told The Globe and Mail Tuesday.

“This is a delicate issue that we need to get right,” the source said.

The Conservatives were spurred to act after China National Offshore Oil Corporation, controlled by Beijing, launched a generous mid-summer bid for Nexen Inc., a major Canadian petroleum producer with oil sands interests. It sparked unease among the Conservative Party’s core constituency over what is seen as a flood of foreign, state-owned companies buying Canadian resource firms.

The takeover could be merely the first of many deals if Ottawa approves it. Other state-owned companies from India to China are waiting to see how Canada handles the CNOOC bid and analysts foresee a “tidal wave” of investment coming from emerging Asian countries. Last Friday night, the Harper government blocked Malaysian state-owned oil company Petronas’s $5.2-billion bid for gas producer Progress Energy Resources Corp., saying it did not consider the deal a “net benefit” for Canada.

Prime Minister Stephen Harper promised in September to reveal his government’s approach to foreign takeovers in a “framework” statement. The Tories are expected to release this policy at the same time as they render judgment on the CNOOC-Nexen deal.

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