In a surprising move Industry Minister Christian Paradis announced on Friday that Petronas'
$5.9 billion takeover bid for Progress Energy had been rejected
under the Investment Canada Act.
In accordance with the provisions of the Act, the Minister
stated that he was "not satisfied that the proposed investment
is likely to be of net benefit to Canada." As is
customary, no further details were provided.
The timing of the announcement was also surprising, at three
minutes before midnight on Friday. The government's
review period would have ended at midnight.
Petronas now has 30 days to make further submissions to the
Minister, at which time the initial decision will either be
confirmed or the acquisition approved.
Speculation is rampant about what this
rejection means for CNOOC's proposed $15.1 billion takeover of
Nexen. In response to the "net benefit" test, CNOOC
has made a number of public undertakings, including the retention
of Nexen's head office in Calgary (overseeing all of the
group's North American operations) and the listing of the new
entity on the TSX. It is not clear whether these undertakings
will be sufficient to satisfy the "net benefit"
test. The government has been pressured from across the
political spectrum to reject the CNOOC-Nexen transaction; in
contrast the Petronas-Progress transaction did not attract much
The review period for the CNOOC-Nexen transaction ends on
November 11. The review period has already been extended
once, and can be extended again with CNOOC's agreement.
Both the Petronas-Progress and CNOOC-Nexen transactions have
been complicated by the acquirors' status as state owned
enterprises in their home countries, leading to a more rigorous review (particularly regarding
commercial orientation, corporate governance, national security concerns and reciprocity) by
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Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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