Government of Canada OKs CNOOC’s $15B acquisition of Nexen, Petronas’ $6B acquisition of Progress Energy oil sands companies; impedes future oil sands purchases by foreign state-owned enterprises
Christian Paradis, Canada’s Minister of Industry, announced on Friday that the federal government is allowing two major acquisitions of oil sands companies by foreign state-owned enterprises (SOEs): the $15.1-billion takeover of Nexen by China’s CNOOC (earlier post), and the $6-billion acquisition by Malaysia’s Petronas of Progress Energy Resources Corp. Both transactions represented a “net benefit” to Canada, Paradis said.
Canada Prime Minister Stephen Harper commented that rather than marking the beginning of a trend, the two major transactions mark “the end of a trend.”
Investment is critical to our Government’s focus on jobs and growth. And, Canadians expect that we shall approve foreign investments that are of net benefit to Canada. But, all investments are not equal.
In particular, as we have indicated for many years, purchases of Canadian assets by foreign governments through state-owned enterprises are not the same as other transactions. The larger purposes of state-owned enterprises may go well beyond the commercial objectives of privately owned companies. This raises the question of when, and to what degree, foreign state control of Canadian business can be of net benefit to Canada.
To be blunt, Canadians have not spent years reducing the ownership of sectors of the economy by our own governments, only to see them bought and controlled by foreign governments instead. That was never the purpose of the Investment Canada Act...In light of growing trends, and following the decisions made today, the Government of Canada has determined that foreign state control of oil sands development has reached the point at which further such foreign state control would not be of net benefit to Canada.
Therefore, going forward, the Minister will find the acquisition of control of a Canadian oil-sands business by a foreign state-owned enterprise to be of net benefit, only in an exceptional circumstance. Outside the oilsands, our Government will strengthen scrutiny under the Act of proposals by foreign state-owned enterprises to acquire Canadian businesses.—Prime Minister Harper
Considerations that would be factored into a review of such acquisition proposals include:
The degree of control or influence a state-owned enterprise would likely exert on the Canadian business that is being acquired.
The degree of control or influence that a state-owned enterprise would likely exert on the industry in which the Canadian business operates.
The extent to which the foreign government in question is likely to exercise control or influence over the state-owned enterprise acquiring the Canadian business.
Over the next four years, Harper said, the Government will raise the review threshold under the Investment Canada Act, to $1 billion dollars for private sector applications only. The threshold for foreign state-owned enterprises will remain at $330 million in asset value—i.e.,the Government will retain its current authorities to assess the net benefit of foreign SOE transactions in the future.