How the Petronas-Progress deal all came falling down – by Claudia Cattaneo (National Post – October 23, 2012)

The National Post is Canada’s second largest national paper.

CALGARY – Michael Culbert, president and CEO of Progress Energy Resources Corp., was anxiously pacing in his Calgary office Friday evening, staying in touch with his counterparts half a world away in Kuala Lumpur, when he went wide-eyed reading the news he was expecting.

It was 11:57 p.m. Ottawa time, 9:57 p.m. in Calgary, or three minutes before the expiry of the federal government’s own deadline to hand down a ruling on whether Progress’s takeover by Malaysia’s Petronas met the confusing “net benefit” test and could be finalized. The brief news release said Industry Minister Christian Paradis had just blocked the deal. Mr. Culbert and his Malaysian buyers were in shock.

Talks between Petronas and the Canadian ministry had gone well, the deal had received little public attention, and the two companies were confident that the merger would prove to be of huge benefit to the country. It fit well into Canada’s strategy of launching exports of liquefied natural gas (LNG) to Asia from the British Columbia coast.

“We [were] moving forward on a very positive step as far as all the activities go, and there really [weren’t] signals until the last hours that this wasn’t going to be approved,” Mr. Culbert said in an interview.

There had been no indications the deal would be impacted by new guidelines promised by the Prime Minister, Stephen Harper, on foreign investment, particularly state-owned enterprises.

Progress and Petronas had been working together for a couple of years and locked up a joint venture last year. The acquisition was widely seen as the logical next step as the two companies moved forward with plans to build a multibillion-dollar plant in Prince Rupert.

“I think that it’s very easy to see that by developing our shale gas opportunities in Western Canada, by developing a new export business industry for Canada, that ultimately this is very positive for Canadians,” Mr. Culbert said.

Details get thin at this point, but it’s believed that the deal was scuttled by the Prime Minister himself, even though Industry Canada was set to approve it.

Suddenly, Progress got swept up in the increasingly loud controversy over investment by state-owned enterprises, specifically CNOOC Ltd.’s takeover bid for Nexen Inc.

For the rest of this column, please go to the National Post website: http://business.financialpost.com/2012/10/22/how-the-petronas-progress-deal-all-came-falling-down/

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