Petronas-Progress: Harper says will clarify foreign investment rules ...

OTTAWA ? Prime Minister Stephen Harper is promising to reveal new guidelines on foreign takeovers amid growing unease about the meaning of the government?s surprise rejection of the latest takeover bid of a Canadian resource company.

The prime minister said Monday new guidelines will be issued ?soon? and that most applications would be accepted.

The statement comes as markets roiled over the Friday night rejection of the $6-billion takeover offer of Progress Energy Resources by Malaysian state-owned oil company Petronas, and what the decision might portend for the $15.1-billion proposal by a Chinese state-owned to acquire Nexen Energy.

We do not have a time scheduled, but soon the government will create a new framework for these investments

Progress shares were down about eight per cent or $1.75 at $19.90 in afternoon trading on the Toronto Stock Exchange.

Reports have suggested the government waited until the last minute, just before the midnight deadline, to announce the decision because it wanted a 30-day extension on its review, but Petronas said no.

?We do not have a time scheduled, but soon the government will create a new framework for these investments,? Harper told reporters in French at a news conference. ?Within that framework that will come out soon, we will be able to welcome the overwhelming majority of investments.?

He was less clear in English, saying that Ottawa ?will give greater clarity on our policy framework when we take a couple of decisions that are before us at the present time.?

Industry Minister Christian Paradis said the government was ?not satisfied? that the acquisition would bring ?a net benefit? to Canada, but said Petronas has 27 days to come back with a better offer.

The minister would offer no other explanation, but trade lawyer Lawrence Herman of Cassels Brock in Toronto said he believes Petronas failed to convince Ottawa it would operate under market principles and not as arm of the Malaysian government.

?This is a very significant decision. It draws a line in the sand and says to any state-owned investor, ?If you want to come into Canada, we expected (you) to operate in accordance to free market principles in terms of corporate governance, decision-making and commercial operations,?? he said.

He agreed the lack of clarity about how Ottawa decides whether to approve foreign acquisitions, particularly from state-owned enterprises, has become serious enough that it may be discouraging investments that the government has said are needed to grow the economy.

?If you are courting China and other parts of Asia, you?ve got to expect a lot of these will come through state-owned enterprises,? he said.

That would not be happening if the government had followed through on its pledge ? made after rejecting a takeover of PotashCorp in 2010 ? to issue clear guidelines on how it reviews applications under the Foreign Investment Act. Now it is paying the price for lack of foresight, he said.

?This improvisation does not in any way restore confidence in the Canadian public in a process that is profoundly broken and it certainly does nothing to restore investor confidence,? he said ?This is no way to manage one of the world?s largest economies.?

Source: http://business.financialpost.com/2012/10/22/ottawa-to-clarify-foreign-investment-guidelines-harper/

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