Canada blocked Petroliam Nasional Bhd’s US$5.23 billion takeover of Progress Energy Resources Corp, saying the bid by Malaysia’s state-owned oil company would not advance national interests.
“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,” Industry Minister Christian Paradis said in a statement late on Friday. Paradis said he could not comment further.
Canada’s second rejection in two years of a multibillion dollar foreign bid for a resource company comes as China’s CNOOC Ltd (中國海洋石油) awaits a decision next month on its US$15.1 billion offer for Nexen Inc. The government blocked BHP Billiton Ltd.’s US$40 billion bid for Potash Corp. of Saskatchewan in 2010 amid opposition from some lawmakers in the western province.
Prime Minister Stephen Harper’s government had been reviewing the Petronas bid under the country’s foreign-takeover law, which requires acquisitions represent a “net benefit” to Canada. Progress Energy said on Oct. 5 the government was to extend its review until Friday. Canada has only rejected three foreign takeovers in 27 years.
“We’re very surprised by the decision that we received this evening,” Progress Energy chief executive officer Michael Culbert said when reached by telephone in Calgary.
Petronas will appeal the federal government’s ruling and Progress Energy will “help where we can help,” Culbert said. “We believe that the transaction is of net benefit to Canada and Progress will be continuing to work with the federal government to prove that point.”
Petronas has 30 days to appeal or provide additional concessions, at which point the government will make a final decision, according to a statement by Paradis.
“Canada has a long standing reputation for welcoming foreign investment,” Paradis said. “The government of Canada remains committed to maintaining an open climate for investment.”
Harper said on Sept. 6 that his government is preparing a “policy framework” for foreign investment to clarify issues raised in takeovers such as CNOOC’s offer for Calgary-based oil and gas producer Nexen. A decision on that friendly bid by the Chinese oil company is expected next month.
Progress Energy agreed in late June to the takeover by Petronas, as Malaysia’s state-owned oil and natural-gas company is known, after rejecting two acquisition proposals from a “multinational oil company,” according to a July 20 regulatory filing.
A buyer of Progress would gain 1.9 trillion cubic feet (53.8 billion cubic meters) of proved and probable gas reserves and 331,842 hectares in British Columbia’s Montney shale-gas region, according to the company’s Web site.