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Canada frets over foreign takeover bids

Sept. 26, 2012 at 8:20 AM   |   Comments

OTTAWA, Sept. 26 (UPI) -- Canada fears foreign ownership of its key corporations and resource entities, officials said in private and public comments mirrored in the media.

Nowhere is the concern more pronounced than in the energy sector.

The oft-repeated Canadian anxiety over foreign share ownership in strategic industries, particularly resource-based energy companies, raw materials producers and utilities resurfaced after the latest state-backed Chinese attempt to buy into Nexen energy firm.

Canadian sensitivity to foreign ownership from beyond Europe and the United States generates frequent media criticism and media campaigns fanned by political opposition parties and dissenting voices in Prime Minister Stephen Harper's government.

Immigration Minister Jason Kenney said rigorous checks and balances were required when faced with foreign takeovers of resources companies in Canada.

Kenney echoed concerns expressed in Canada and the United States over foreign sovereign wealth funds emerging as shareholders of sensitive entities deemed strategic or vital for national security interest.

Opposition to such takeovers is based on both security concerns and criticism of the foreign states' track record in governance and human rights. Kenney criticized China for its human rights record.

State-owned China National Offshore Oil Corporation is hoping for a Canadian government go-ahead for a $15.1 billion takeover bid for Nexen, which has headquarters in Calgary.

"I think most Canadians want to ensure that the government applies a rigorous lens to acquisitions of large Canadian resource companies, particularly by state-owned enterprises," said Kenney, quoted by The Gazette newspaper in Montreal and other Canadian media.

The Nexen deal is being examined under the Investment Canada Act, which requires foreign takeovers to be of net benefit to the nation. Critics want Canadian firms to look elsewhere and shun Chinese equity investments.

The issue has also drawn spotlight from the Canadian intelligence services, which particularly cited state-owned foreign companies that could be pursuing their own agenda or the purposes of the foreign government.

Critics cite Europe's dependence on energy supplies from Russia and former members of the Soviet Union.

Kenney said Canada looked forward to "a balanced approach on Canada-China relations, one that advances both our interests, such as trade and commerce, and our values such as the importance of human rights."

Top oil industry executives are asking Ottawa for rules to protect Canadian ownership of major oil sands companies from a flood of foreign investment expected in the sector, The Globe and Mail said on its website.

Canada's oil sands contain the third-largest crude oil reserves in the world and are a strategically critical resource for the country, industry executives argue, said the newspaper.

They support the proposed acquisition of Nexen Inc. by CNOOC but note the deal signals growing foreign interest in the oil sands and insist Ottawa needs to ensure a substantial level of domestic ownership as more deals loom.

"I think it is important to get some ground rules in place before the next one," said Murray Edwards, chief executive officer of Canadian Natural Resources Ltd., one of Canada's biggest energy companies and a major oil sands player.

Edwards was among a large contingent of top executives gathered in Ottawa for a two-day session on how Canada should position itself to take full advantage of Asia's investor potential.

"There is a tidal wave that is heading out of China in the next decade and I don't think we're ready for it," University of Toronto economist Wendy Dobson said. Chinese firms will be looking to invest more than $1 trillion in the coming decade to acquire access to resources and related technology, The Globe and Mail said, quoting Dobson.

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