Malaysia-based Petronas is fighting for its impending takeover of Canada’s Progress Energy Resources Corp. (TSE: PRQ).
Both companies agreed to extend the “outside date” governing their deal to November 30, with some scope of stretching it even further. However, after that, either of the two can terminate the deal, which is expected to be worth $6 billion.
On October 19, the Canadian government rejected the Petronas bid to take over Progress. But the company has another month to establish that the deal will be a “net benefit” to Canada.
As of now, both companies are working to gain approval from Canadian Industry Minister Christian Paradis, according to the Globe and Mail. The deal is important, as it throws light on how the government might view CNOOC Ltd.’s (NYSE: CEO) $15.1 billion bid for Nexen Inc. (TSE: NXY).
Moreover, it might indicate how the Canadian government will treat future foreign investment proposals.
Progress saw its shares rise by 8 percent on Monday; however, the new price of $19.81 is still below the $22 bid price. Nexen, for its part, gained 5 percent to hit $24.53, but that’s also below CNOOC’s bid price of $27.50 per share.
It looks like Ottawa is seeking to set in place a set of rules for regular domestic corporations and one for those controlled by international governments before issuing any final guidance to Petronas.
Petronas has, of course, stated that it will keep the current management framework of Progress intact regardless of market forces, and it will establish a Canadian board (Progress Energy Canada) for Progress after the takeover.
Canadian law mandates that at least 25 percent of directors at any Canadian corporation should be Canadian residents.
On October 19, the Ottawa government requested more time from Petronas to review the application; however, the company declined. In response, the government withheld approvals until after the deadline.