Looking back, new state-owned enterprise takeover rules would have blocked few deals

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To other countries, the headlines stemming from the Canadian federal government's decision to block future oil sands takeovers by state-owned enterprises could easily come across as overly protective. Boil the news down to just a few words, and you might get something like: "Canada cracks down on foreign takeovers."

But to our friends in other countries, there is good news: The vast majority of takeovers inked in the past few years would get the green light. Read past the headlines and you'll see the rules are actually pretty lax, largely because only oil sands assets are fully protected, and also because joint ventures with minority control are still encouraged.

As Streetwise pointed out Friday, deal makers here already see lots of room for future M&A activity. To elucidate that point, we've compiled a list of recent deals (with the help of Osler, Hoskin & Harcourt LLP) that would've been blocked by the government under the current rules, and contrasted them with a list of all of the investments that would still get approved.

Deals that would have been blocked, in descending order by size:

• $15.1-billion (U.S.) – CNOOC Ltd.’s acquisition of Nexen Inc. – 2012
• $4.1-billion (Canadian) – Korea National Oil Corp.’s acquisition of Harvest Energy Trust – 2009
• $2.1-billion (U.S.) – CNOOC Ltd.’s acquisition of OPTI Canada Inc. – 2011
• $1.9-billion (Canadian) – PetroChina International Investment Co.’s acquisition of 60 per cent interests in two of Athabasca Oil Sands Corp.’s project

*Note: Osler listed Sinopec's $4.65-billion (U.S.) acquisition of ConocoPhillips' stake in Syncrude as an example of deal where a foreign SOE acquired control of a Canadian business, however, Sinopec owns 9 per cent of the partnership so the reasoning for the inclusion is unclear.

Major deals for Canadian assets, both by SOE's and private companies, that would still get the green light, in descending order by size:

• $6-billion – Petronas buys Progress Energy Resources Corp. – 2012
• $4.6-billion – Cliffs Natural Resources buys Consolidated Thompson Iron Mines Ltd. – 2011
• $3.25-billion (U.S.) – Apache Corp. buys Canadian assets from BP PLC – 2010
• $2.9-billion (Canadian) – Encana sells 40 per cent stake in Cutbank Ridge property to Mitsubishi – 2012
• $2.6-billion – Walter Energy buys Western Coal Corp. – 2010
• $2.3-billion – PTT Exploration and Production buys 40 per cent stake in Statoil’s oil sands project – 2010
• $2.2-billion – Poland’s KGHM buys Quadra FNX Mining – 2011
• $1.7-billion – China Investment Corp. buys 17 per cent stake in Teck Resources Ltd. – 2009
• $1.7-billion – Total E&P Canada buys stakes in Suncor assets – 2010

• $1.25-billion - China Investment Corp. buys 45 per cent stake in Penn West oil sands project and 5 per cent stake in Penn West itself - 2010

• $1-billion – PetroChina buys 20 per cent stake in Royal Dutch Shell PLCs’s shale gas properties in B.C. – 2012

There's one more thing to note. Although the federal government is ring-fencing oil sands assets, it "will also continue to carefully monitor SOE transactions throughout the Canadian economy." For that reason, it's unclear how a deal such as International Petroleum Investment Co.'s $2.3-billion (U.S.) acquisition of NOVA Chemicals Corp. in 2009, which was the first time a sovereign wealth fund took full control of a Canadian company, will be treated in the future. Under the current rules, it appears that this could be added to the list of deals that would get the green light.

Note: An earlier version of this post listed Sinopec's $2.2-billion acquisition of Daylight Energy as a deal that would have been blocked under the new SOE rules. That may not be the case. Although Daylight's current production is weighted 55 per cent toward oil, the production is light oil, not oil sands. It's unclear how the government would treat a company like this.