* Too little time to review Nexen, prepare general framework
* Extension does not mean bid is in trouble-sources
* Harper to be overseas in week running up to Nexen deadline
By Randall Palmer
OTTAWA, Oct 31 Canada is likely to extend its
review of the $15.1 billion bid by China's CNOOC Ltd
for oil producer Nexen Inc beyond next week's deadline
to allow more time for the government to formulate a broad
framework on foreign investment, two sources close to the matter
said on Wednesday.
The sources said there was too little time before the Nov.
10 deadline for the federal government to conclude deliberations
on the Nexen deal as well as prepare a framework to clarify its
overall policy on foreign deals.
Ottawa has promised to announce such a framework at the time
it makes its ruling on the Nexen proposal. As a consequence, the
sources said, the government would likely seek to extend the
review period for a second time.
Under Canadian law, all major foreign takeover proposals are
subject approval of the federal government, which must certify
that the deals benefit the country.
The sources, who spoke on the condition of anonymity due to
the sensitivity of the issue, stressed that the delay was not a
signal that the bid was necessarily in trouble.
That said, any delay would increase the carrying cost of
those who are holding Nexen shares in the hope of approval.
The timing is complicated by Prime Minister Stephen Harper's
plans to travel to Asia from Nov. 3. Harper, who has been
closely involved in the discussions on the framework, is not
scheduled to be back in Ottawa until Nov. 11, after the current
The government has extended the standard 45-day review
period by 30 days. That extension expires on Nov. 10, but
because that date falls on a Saturday, when government offices
are closed, the effective deadline is Nov. 9.
With the permission of state-owned CNOOC, the government
could extend its review for another 30 days, or a shorter
period. CNOOC is widely expected to agree to any such request.
The Canadian government has said foreign investment is
needed to develop the country's vast energy resources but it has
been grappling with whether to limit any country's share. It
also needs to decide on how deal with state-owned enterprises
that may not play by free-market rules.
Polls show Canadians are opposed to the government approving
the CNOOC bid, and Harper has said Ottawa would take public
opinion into account.
Harper told reporters last week that the government would
announce its broad framework "fairly shortly" and "in due
course. He said the government would give greater clarity on the
policy framework "when we take a couple of decisions that are
before us at the present time".
In addition to the CNOOC bid, Harper was referring to a
pending $5.17 billion offer by Malaysia's Petronas to
buy Canada's Progress Energy Resources Corp.
In the case of Petronas, Industry Minister Christian Paradis
initially issued a two-week extension. Later, on Oct. 19, he
declared the transaction would not benefit Canada, but rather
than ruling it out, he offered Petronas 30 days to make new
representations to the government.
The Petronas decision was widely seen as a question of
timing rather than a sign of hostility to foreign investment.
Nor was it seen as precursor to the upcoming CNOOC
In New York, Nexen shares closed at $23.90, up 2.1 percent
from Friday's close and below CNOOC's $27.50 offer. In Toronto,
the shares ended 2.7 percent below Tuesday's close at C$23.85.