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Canada readies foreign takeover rules
Gary Park For Petroleum News
Abu Dhabi’s national energy company, better-known as TAQA, may have crossed the line ahead of whatever hurdles the Canadian government may erect in the path of Canadian takeovers by foreign state-owned firms.
Investment Canada, the federal agency that regulates foreign investment, has given the go-ahead for TAQA’s C$5 billion purchase of PrimeWest Energy Trust and its US$540 million acquisition of Pioneer Natural Resources’ Canadian assets.
TAQA said Industry Minister Jim Prentice has determined that each transaction carries a “net benefit to Canada,” without specifying those benefits other than saying it expects to achieve up to C$700 million in operational efficiencies and capital savings over the next three years.
Meanwhile, Prentice told reporters he will issue new takeover guidelines before the end of the fall Parliamentary session on Dec. 21.
He has said previously that state-owned companies can pose problems for the Canadian economy because they can have noncommercial objectives or poor transparency.
Prentice said two months ago that although the government does not intend to create major new hurdles for foreign investors despite concerns about “hollowing out” of key economic sectors, Ottawa is considering an explicit “national security test” to guard against foreign companies gaining control of sensitive defense- and security-related Canadian firms.
Concern over Chinese incursion Faced with growing concern in Canada about the gradual incursion by Chinese state-owned companies into the natural resource sector, the government of Prime Minister Stephen Harper has been promising to introduce a new screening mechanism that focuses on companies that don’t operate according to market rules or have transparent governance.
At the same time, Prentice insisted Canada is not and will not become “protectionist … to protect Canadian industry from the full rigors of global competition.”
The Canadian Council of Chief Executives, following a survey of Canada’s 150 largest companies, said hurdles should be put in place to prevent undesirable foreign entities from snatching up Canadian companies, especially in the oil patch.
Council head Tom d’Aquino said business leaders favor an amber light, not a red light.
“When state-owned companies are involved, a more rigorous test should apply” but only in the rarest cases, he said.
While 80 percent of the CEOs surveyed favored new rules on state-controlled corporations, they called for relaxed competition laws to make room for more mergers so that Canadian corporations can grow and become more competitive globally.
Canadian Chamber of Commerce President Perrin Beatty, in a letter to Prentice, urged Ottawa to tread carefully before imposing new rules.
“Intervention should be limited and should not discriminate against, or impede, market-driven foreign investment,” he said.
The chamber is concerned about any steps that might cut off a vital source of capital or any “national security” review of future takeovers that could “lengthen the approval time frame for legitimate foreign investments.”
Beatty noted that more than 20 state-owned enterprises have already invested in Canada and “provided net benefits to our economy.”
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