Petronas, Progress not giving up after Ottawa balks

Mon Oct 22, 2012 8:40pm EDT
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By Jeffrey Jones and Euan Rocha

CALGARY/TORONTO (Reuters) - Canada's Progress Energy Resources Corp sought to reassure investors on Monday that its proposed takeover by Malaysia's Petronas was not dead in the water, saying the two companies would start new talks this week to address the Canadian government's concerns.

Progress Chief Executive Michael Culbert blamed a "communications breakdown" for Canada's surprise rejection of the $5.2 billion deal late on Friday night, and said he was optimistic that the deal could get back on track.

Canadian Prime Minister Stephen Harper also appeared to soften the government's stance on Monday, saying Industry Minister Christian Paradis had simply not been in a position to decide if the deal was of "net benefit" to Canada. That was a softer line than Paradis' comment on Friday that the deal did not meet the "net benefit" test.

"I think in a lot of cases ... like this, it's a communications breakdown," Culbert told Reuters in an interview, adding that he had received no indication from officials prior to the 11th-hour rejection that the government had any concerns.

Culbert offered no details on what caused the communications breakdown but said both sides were ready to talk. Paradis gave the companies 30 days to make their offer more palatable but declined to specify what his concerns were.

"What I'm hoping is that bridge can be rebuilt here this week and we can actually have some good effective discussions and move this along," Culbert said, adding that talks aimed at assuaging government concerns would start on Tuesday.

In a conciliatory move, Petronas extended its deadline by up to 90 days to close the acquisition of Progress, one of the largest owners of exploration lands in the gas-rich Montney shale region of British Columbia.

That would give Canada more time to develop a set of long-promised guidelines on foreign investment, especially by state-owned enterprises such as Petronas, as Ottawa also scrutinizes a much larger and more contentious transaction, the $15.1 billion takeover of Nexen Inc by China's CNOOC Ltd.   Continued...

Motorists queue to fill natural gas at a Petronas station with its landmark Petronas Twin Towers headquarters in the background, in Kuala Lumpur February 4, 2012. REUTERS/Bazuki Muhammad