Petro-Canada, Suncor seek repeal of ownership limit

Tue Mar 24, 2009 11:30pm EDT
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By Randall Palmer and Scott Haggett

OTTAWA/CALGARY (Reuters) - Suncor Energy Inc and Petro-Canada will ask the Canadian government to repeal a law that protected Petro-Canada from any unwanted takeovers but left its stock depressed, according to documents filed with regulators.

Suncor agreed on Monday to buy Petro-Canada in an all-share deal, initially valued at $18.4 billion ($15 billion), to create Canada's largest oil company and the dominant player in the country's vast oil sands.

The companies say that once the takeover is complete, the deal is structured so that Suncor will be extended the same protection of shareholder limits that were set up in the 1991 Petro-Canada Public Participation Act.

Petro-Canada was founded as a government-owned company in 1975, and the act was put in place as Ottawa started to issue shares in the firm, to ensure a diversified ownership.

However, according to the merger agreement, Suncor doesn't want the shelter of the act, which limits individual investors to a 20 percent stake. It and Petro-Canada have both pledged to seek a repeal of the law.

"The parties ... shall co-operate and use their reasonable commercial efforts to obtain a commitment from the government of Canada to support a repeal of the Petro-Canada Act," they said in a filing dated March 22.

The act is widely seen as a brake on any gains by Petro-Canada stock, which has traded lower than that of its rivals because of the reduced chances of a takeover.

"Petro-Canada has always been undervalued in terms of the additional value the market gives for takeovers," said Pat Magee, a portfolio manager with Leon Frazer & Associates, which manages the IA Clarington Canadian Conservative Equity Fund, controlling about 175,000 Petro-Canada shares. "The ownership cap has limited (the stock) to some extent."   Continued...

<p>Suncor Chief Executive Rick George (L) and Petro-Canada Chief Executive Ron Brenneman hold a media conference in Calgary March 23, 2009. REUTERS/Mike Sturk</p>