Malaysia’s Petronas has made additional pledges and extended the deadline for its $6-billion takeover of Progress Energy Resources Corp. in its quest to gain federal government approval of the deal.
Petronas filed its revised formal submission Monday after answering questions from the government over the past few weeks, a source close to the deal said Tuesday. Petronas extended the deadline on its offer for Calgary-based Progress until Dec. 30 to give the Conservative government more time to review the deal.
In a statement Tuesday, Petronas said it made “additional representations and submitted further undertakings” to the government.
Petronas’s fresh submission contains a “combination of enhancing existing [promises] and adding new ones,” the source said. Details of the new submission have not been revealed.
Industry Minister Christian Paradis will now study the latest Petronas offer to decide whether the new promises are enough to ensure Canada benefits from the takeover. It’s not clear when the government will respond.
Meanwhile, Ottawa is also considering whether to approve CNOOC Ltd.’s $15.1-billion bid for Nexen Inc., which would put a large oil sands business under Beijing’s control. The government has repeatedly said it wants foreign investment in Canada’s energy sector, but the two big deals have raised concerns across Canada as well as inside the Conservative caucus.
Mr. Paradis turned down Petronas’s original submission Oct. 19, and Petronas had 30 days to appeal it and negotiate further.
The company is wholly owned by the Malaysian government and appeared to be having trouble meeting Ottawa’s desire for transparent corporate governance. The deal’s rejection caught Petronas, Progress and investors off guard.
To win approval on takeover deals, the federal government requires state-owned companies to operate as commercial entities rather than policy arms of their governments. It encourages those companies to have stock listings in Canada and have separate boards for Canadian subsidiaries with local directors, though other foreign-acquired energy companies have no listings.
Petronas, which already has a joint venture with Progress, discloses financial information, and some of its subsidiaries are publicly traded.
Petronas originally promised to create a Canadian subsidiary, named Progress Energy Canada. By law, 25 per cent of the directors at Canadian corporations must be Canadian residents. If the board has fewer than four directors, at least one must be a Canadian resident.
China’s CNOOC has pledged to list on the Toronto Stock Exchange should its bid for Nexen be approved. Nexen owns the Long Lake oil sands project, part of Syncrude, and other assets around the globe.
Petronas and CNOOC both say they will keep existing management teams and employees in place at their target companies. The federal government also demands that foreign buyers maintain spending levels and CNOOC has said it will enhance spending.
Petronas is a key backer of one of several proposed liquefied natural gas (LNG) export terminals on the B.C. coast that are planning to ship Canadian gas to Asian markets. The Malaysian company previously said it would keep spending at Progress strong, even if the energy markets dive.
Progress’s board and shareholders have approved the takeover by Petronas, subject to Investment Canada approval.
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