Malaysia's Petronas is taking steps to keep alive its takeover of natural gas producer Progress Energy Resources Corp. alive.
The companies extended the so-called outside date on their deal to Nov. 30, with room to further stretch the deadline, the Canadian company said in a statement Monday. After the outside date, either side can kill the $6-billion deal.
However, Petronas and Calgary's Progress still face an important deadline with Ottawa. The government refused to approve their union Oct. 19, but gave Petronas 30 more days to prove the deal is a "net benefit" for Canada. This deadline remains intact, said Progress' Greg Kist, vice-president of marketing, government and corporate relations.
Petronas and Progress are working with the government in hopes of winning Industry Minister Christian Paradis' approval. Petronas intends to make "further submissions" to Mr. Paradis, Progress said in its statement. The market is closely watching this deal, looking for hints regarding Ottawa's stance toward CNOOC Ltd.'s $15.1-billion (U.S.) bid for Nexen Inc., and how future foreign investment proposals will be treated. Without cash from abroad, growth in Canada's energy industry, from the oil sands to the liquified natural gas market, could sputter.
Progress' shares climbed 8 per cent Monday, but at $19.81 remain well below the $22 bid price. Nexen also rallied on the news, gaining 5 per cent to $24.53, but also well below the $27.50 (U.S.)-per-share bid by CNOOC.
Ottawa wants to clarify foreign takeover rules before giving Petronas its blessing, according to sources who say Ottawa is developing two sets of rules: one for regular corporations and a second for companies controlled my foreign governments.
Petronas, a state-owned company, has pledged to keep Progress' management and employees in place and maintain spending even if the energy market turns sour. It also intends to set up a Canadian board for its subsidiary, which will be named Progress Energy Canada, Mr. Kist previously said. By law, 25 per cent of the directors at Canadian corporations must be Canadian residents. Should the board be smaller than four, at least one director must be a Canadian resident.
CNOOC has gone one step further, promising to list shares of the Beijing subsidiary on the Toronto Stock Exchange. Listing shares is not a requirement for foreign takeovers, although as Ottawa demands commercial transparency, it could be a plus in the "net benefit" test. Petronas discloses financial information for the entire company, and some of its subsidiaries are publicly listed.
The government on Oct. 19 asked Petronas for more time to review its takeover application, but Petronas said no. Ottawa followed by holding back approval because its review deadline expired. The decision came as a shock to Progress, Petronas, and the market.