Canada’s authorities said Friday the federal government’s review of China National Offshore Oil Corp.’s $15.1 billion proposed takeover of Nexen Inc. (NYSE, TSX:NXY) under the Investment Canada Act will take another 30 days.
Speaking to reporters in Dakar, Senegal, Canadian Prime Minister Stephen Harper gave investors more reasons to speculate about the final outcome of the deal, as he said that China’s “very different” political and economic systems are a concern for his government.
Those remarks, reports Reuters, are among the most revealing Harper has made in connection with the CNOOC-Nexen deal.
“The relationship with China is important. At the same time it’s complex. It’s complex because the Chinese obviously have very different systems than we do, economic and political systems, and that’s why obviously some of these particular transactions raise concerns,” Harper was quoted as saying by Reuters.
He added his government would ensure that Canada has not only a growing relationship with China, but also one that is in the country’s best interests.
Canadian leaders have now another month to review whether the possible takeover represents a so-called net benefit to the economy, as required under the country’s foreign-investment laws.
Since CNOOC made an official application to the Canadian government in late August, mixed messages about the authorities’ position on the subject have generated increasing anxiety among investors. Some fear public opposition will convince the government to eventually block the deal.
Senior Conservative officials, led by Harper, have suggested the issue of market reciprocity — or guarantees that Canadian investors will get access to Chinese assets — could play a key role in the ruling.
Truth is the country’s ruling Conservative Party is split over the matter and Harper has been left with difficult final call to make, as a previous analysis by Reuters explains:
A green light, still viewed by many as likely, would allow China’s biggest ever foreign takeover, extend China’s foothold in Canada’s crude-rich oilsands – an area with the biggest proven resources of energy outside Venezuela and Saudi Arabia — and help Beijing fulfill its drive for better access to energy resources to fuel the world’s second-largest economy.
A “no”, or conditions on the deal that were too onerous for CNOOC, would cut the takeover premium on Canadian resource stocks, and likely stem Chinese investment in the energy patch, as well as damaging Canada’s already dented reputation as a friendly jurisdiction for foreign investment.
It would also infuriate Beijing, which might make the Chinese market a less welcoming destination for Canadian exporters. When U.S. opposition thwarted CNOOC’s attempt to buy California-based Unocal Corp. in 2005 it angered Chinese officials and strained Sino-U.S. relations.
But Canada’s has to also consider the consequences of upsetting its Southern neighbour, whose pressure could come into play at the time of the final decision.
A U.S. prove of disapproval came a week ago, when Nebraska Republican Congressman Lee Terry urged President Obama in a blog to “Oppose CNOOC-Nexen merger, approve Keystone”:
Recently, Chinese state oil company, CNOOC, announced its intention to purchase Canadian oil company, Nexen, for $15.1 billion in cash. I have deep concerns about this merger and what it means for American national security and energy security in the future.
…With the purchase of Nexen, China will control a major North American oil company. China will firmly be positioned in our front and backyard.
Should the biggest ever foreign investment in the North American country get the green light, CNOOC has promised it will make Calgary the headquarters of its North and Central American operations, will join Canada’s main equities market, the Toronto Stock Exchange and will keep current Nexen employees.
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10 Comments
Joe
No clear explanation has been done.
James Chisholm
Steven Harper shouldn’t allow this deal. China is already moving Chinese workers into coal mining companies in B.C., neutralizing benefits of jobs going to Canadians.
Additionally, China has an extremely bad record of abuses to other countries when they acquire assets within country. Steven Harper’s advisers should read about international issues raised by Chinese takeover of other country assets – it is not a very good history. Even African countries have disallowed Chinese investment into their countries based on a Chinese record of abuses.
Marc Authier
A reminder about Africa. The rape and the plundering the last centuries was mostly made by the British, the French, the Portugese, the Dutch, the Germans, the Spanish. And in South America mostly the Spanish, the Portugese and oh yes, the pure USA. China is just as any other european country or USA.
Bama
Mr. Harper should consider this take-over by Cnooc, owened by China, a country where no-respect for human life and morality.
Marc Authier
Yeah. And Wall Mart , GM, IBM, GM, and Saint Steve Jobs from Apple Computer etc….. make handsome sums of money with their chinese partners. There is so much hypocrisy here. Bet you, you buy most of your consumer crap at Wal Mart or have a couple of I-pods ALL MADE IN CHINA by the way. The truth is that if you deny China to buy assets in the West, they will eventually dump the 4 trillon US dollars in the market and you will have hyperinflation in the US and the rest of the world.
art427
I do not trust communist or dictator governments and i am sure most Canadians don’t either. I say no to the deal. Let them invest in a portion but NO TO ANY TAKEOVERS BY ANY FORIGN GOVT.
Marc Authier
No I suppose you trust the criminal cartel operating the FED ? Today I see no difference whatsover with the Chinese fascists running China and USA CIA controlled Goldman Sachs and JP Morgan. Hank Paulson was number at the CIA before being major shareholder at Goldman Sachs. ENRON also was controlled by CIA scums. You are really naive when it comes to USA. Globalization today is runned by globalist criminal scum. Their nationality does not matter. NEXEM shareholders will have to sue the Canadian government. Its a clear violation against free markets and totally fascist act from the part of Harper.
Trevron
I don’t think the decision should be made based on the possibility of straining the China-Canadian economic relationship. Harper is essentially saying we don’t trust a communist nation that has a terrible human rights record. Please don’t compromise some core Canadian values for the sake of money.
Marc Authier
China is not a communist nation today.It more fascist that comminist. Its much closer to free market economy than USA today. You know nothing about China in 2012. Communist nation China ? Thats a very funny one indeed.
Marc Authier
The shareholders of Nexem will have to sue Stephen Harper. That canaidian CIA neocon from Alberta goes against free markets and capitalism. Shareholder will have to sue the Canadian government for the profits losts.