KUALA LUMPUR - Malaysian state oil company Petronas said on Monday it has extended the closing date on its bid for Canadian gas producer Progress Energy Resources until Nov. 30, as it works to overturn the Canadian government’s rejection of the proposed deal.
Canada blocked Petronas’ $5.17 billion bid for Progress this month after Industry Minister Christian Paradis said it was unlikely to bring a “net benefit” to the country. The government gave Petronas 30 days to make additional representations to alter the ruling.
Petronas said it intends to make further submissions to the ministry in order to obtain approval of the proposed deal. The company said it had met with Canadian officials to understand the basis for the rejection.
The transaction was earlier expected to close by Oct. 31. Under the terms of the deal, Petronas has the right to extend the outside date from Oct. 31 for up to 90 additional days, in 30-day increments, if the required regulatory approvals have not been obtained.
Two Petronas sources familiar with the deal told Reuters earlier on Monday that the company had agreed to an extension with Progress and was eager to complete the acquisition despite the unexpected decision by Canada.
The Petronas board agreed to the extension at a regular monthly meeting, the sources told Reuters. The Malaysian company is also studying additional steps to reassure Canada that the proposed acquisition will meet the “net benefit” requirement, the sources said.
“Petronas will go all the way to secure this deal. It is important to Petronas that the deal is done,” one of the sources said.
The Canadian government, sources have told Reuters, wanted to approve the deal but was afraid doing so would tie its hands when reviewing a much more controversial $15.1 billion bid by China’s CNOOC Ltd for Nexen Inc.
Spokespeople for Canadian Prime Minister Stephen Harper and Paradis were not immediately available to comment.
Officials from Petronas and Progress held talks in Ottawa last week with the investment review division, part of the country’s industry ministry. Canadian officials are drawing up new guidelines for investment by foreign state-owned companies, possibly complicating Petronas’ attempt to improve its offer.
Petronas sources said Canada was not keen on Progress being delisted from the Toronto Stock Exchange if the Petronas buyout was approved, due to concerns about accountability.
Progress had no comment on the discussions.
“We don’t have anything further to add to what is already contained in the news release,” Greg Kist, a spokesman for the company said in an e-mail.
CNOOC has pledged to seek a listing of its own shares on the Canadian exchange, establish international headquarters in Calgary and retain Nexen’s staff and capital spending.
“Progress is a much smaller deal than Nexen, is the argument, and Petronas has promised to retain Progress staff,” said the second Petronas source with direct knowledge of the deal.
“After all, we need the expertise in unconventional oil and gas, but we now need to make changes to convince Canada.”
Petronas officials say they will underline their plans with Progress under an existing joint venture to build an LNG export terminal on the Pacific coast.
“Petronas is moving on with this joint venture for the LNG export terminal. It will bring about more jobs,” said the second source.
Progress CEO Michael Culbert has blamed a “communications breakdown” for Canada’s rejection of the deal, and said he was optimistic the deal could get back on track.
Harper’s office has declined to comment on whether CNOOC-Nexen derailed the Petronas-Progress approval, or if there had been miscommunication between his government and the companies.
Progress shares rose sharply following the extension of the arrangement. The shares were up $1.23, or 6.7 percent, to $19.59 by midday on the Toronto Stock Exchange.