Sources: Canada Faces Pressure to Exact Better Terms in CNOOC-Nexen Deal
OTTAWA - Canadian officials are under pressure to exact better terms from Beijing-controlled CNOOC Ltd. in exchange for approval of its proposed $15.1 billion takeover of Canadian energy firm Nexen Inc., according to people with knowledge of the deal and the government review.
Officials at Canada's industry department are considering requests from stakeholders that the Canadian government extract firmer guarantees from the Chinese state-owned enterprise in terms of employment levels, capital spending, and research and development spending, these people said. There's also a push for it to demand that CNOOC guarantee a minimum number of board seats be set aside for Canadians, and to require that Canadians have a significant presence in the executive suite at a China-controlled Nexen.
Among the parties calling for such changes is the provincial government of Alberta, home of Canada's vast oil sands and Nexen's home base, these people said.
Earlier this week, Alberta Premier Alison Redford, the equivalent of a U.S. governor, said the deal would be beneficial for the Canadian economy. A spokesman for Ms. Redford wasn't immediately available to comment Wednesday.
Under Canada's foreign investment law, the federal government is compelled to vet the CNOOC-Nexen transaction, the largest yet by a Chinese state-owned enterprise, to ensure it provides a so-called net benefit to the country's economy. It has the power to block the deal if it believes it's not in the country's economic interest.
Canadian provincial governments don't have a formal say in the Canada's investment-review process, but any provincial opposition to a deal would carry weight in the federal government decision.
Canada's Industry Minister, Christian Paradis, is overseeing the Canadian government's review of the Nexen deal, and Mr. Paradis reiterated Wednesday that his officials are closely scrutinizing the deal. Officials in his office weren't available for comment on requests his department has received for richer conditions from CNOOC.
A spokesman for CNOOC declined to comment on the review process. The concern, according to people familiar with the deal review, is that there is too much "qualifying" language in the official CNOOC application filed with the Canadian government. CNOOC, however, is said to be prepared to look at sweetening its offer if required to appease concerns.
Copyright (c) 2013 Dow Jones & Company, Inc.
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