Motorists queue at a Petronas station with its landmark Petronas Twin Towers headquarters in the background, in Kuala Lumpur in this February 4, 2012 file photo. (REUTERS/Bazuki Muhammad/Files)
OTTAWA - The federal government is expected to require foreign state-owned enterprises that want to buy Canadian companies to maintain a heavy dose of Canadian content and Canadian values in their Canadian operations.
That, though, may be a lot easier said than done.
And just how the government will go about doing that was a subject of heavy speculation this week among Ottawa lobbyists and out-of-country fund managers and investors, all of whom had an eye on a deadline Sunday when the feds must pass judgement on a $5-billion bid by a Malaysian state-owned-enterprise (SOE), Petronas, for Calgary-based Progress Energy.
That decision is being closely watched for what it might say about the highly controversial $15-billion bid by a Chinese SOE, CNOOC, for Calgary oil-and-gas producer Nexen. The deadline for that decision is Dec. 7.
And while those applications are being considered, Prime Minister Stephen Harper and his closest advisors are developing new guidelines or a framework for future applications by SOEs to snap up Canadian companies.
Expect to see a decision on the Petronas and CNOOC applications before the Harper government announces the new framework for future SOE investments.
Meanwhile, Conservatives are hearing from voters who will go to the polls in three byelections later this month that they are very nervous about giving foreign SOEs — especially those from China — control of Canadian companies, particularly in the resources sector.
The Conservatives are facing surprisingly tight battles to hold on to seats they won in the last general election in the Ontario riding of Durham, near Toronto, and in another riding in downtown Calgary.
At least three polls, including two by Abacus Data for Sun News Network, show that a majority of Canadians, including Albertans, across the political spectrum are nervous about foreign control — and Chinese control, in particular — of Canadian firms.
So with all that, where do things stand?
The short answer is: No one quite knows for sure.
Government sources are unusually silent on the file.
Andrew MacDougall, the prime minister’s director of communications, declined to discuss any aspects of either application or the forthcoming SOE guidelines.
Lobbyists who normally get insight into the government’s thinking on these kinds of files through unofficial back channels are also saying that things are “tight as a drum.”
So with that caveat — that no one’s quite sure of anything — here’s the speculation flying around New York, London, Chicago and Ottawa:
- A Canadian company acquired by an SOE will be required to have a board of directors, which includes independent directors who are Canadian citizens. It’s not clear if a majority of directors will have to be Canadians.
- The SOE will be required to provide regularly publicly available reports on its activities in Canada, similar in some ways to the reports that publicly traded firms provide every quarter. The government’s objective here: Transparency.
- The managers of the Canadian company acquired by the SOE will be expected to operate in an “autonomous” fashion, adhering to the principles of a market economy. It’s not clear just how the government will measure this.
Beyond that, the federal government may ask some SOEs who want to buy Canadian to commit to annual investments in Canada. Other SOEs, possibly including Petronas, will be asked to re-list on a Canadian stock exchange, giving Canadians the chance to be minority shareholders in the Canadian unit of the foreign SOE.
The first checkpoint on this complex, but important series, of questions comes Sunday with the Petronas deadline.
For now, the consensus opinion among those watching the file is that the government will buy itself some more time with yet another extension of its own deadline.