Government denies Petronas’ bid to acquire Progress Energy

Industry Minister Christian Paradis announced late Friday night that the government is not satisfied that the proposed acquisition of Calgary-based natural gas company Progress Energy Resources  Corp. by Malaysia’s state-owned oil company Petronas was likely to be of net benefit to Canada. This means that the deal cannot go ahead.

The Investment Canada Act requires that foreign takeovers of Canadian businesses over $330 million (in the case of investors from WTO member countries) must be approved by the government, and that proponents of the transaction must show that the takeover is “likely to be of net benefit to Canada”. While the Act does set out a number of factors for the government to consider, such as the impact of the investment on employment, productivity and industrial efficiency, and the compatibility of the investment with national policies, the “net benefit” test remains poorly defined.

Friday’s notice from Minister Paradis triggers a 30 day period during which Petronas can make further submissions or offer further undertakings in order to convince the government that the investment is of net benefit to Canada. In a news release issued on Saturday, Progress Energy said it planned to use the 30 day period to try to convince the government to allow the deal to proceed.