More takeovers coming, Scotia Bank exec says
Companies graduate from joint ventures to outright takeovers
State-run and publicly traded companies from China, Japan and South Korea have graduated from equity investments to joint ventures and are now eyeing direct takeovers of Canadian energy companies, the head of global banking and markets at Scotia Bank and president of Scotia Waterous says.
“That’s where we see most of the activity and interest level today,” said Adam Waterous, speaking yesterday at an Asia-Canada Unconventional Resources Forum hosted by the Alberta government.
The Conference Board of Canada warned last week that “arbitrary political interference” risks cutting off Chinese investment in Canada’s resource industries.
It recommended rewriting Canada’s foreign investment rules so that the federal government would be required to show an investment is “contrary to the national interest.” Companies must currently show a proposed takeover is of “net benefit” to Canada.
In June, Petronas, Malaysia’s state-run oil and natural gas company, offered $5.5 billion for Calgary-based natural gas producer Progress Energy Resources Corp. The two companies had previously teamed up to develop a natural gas property in British Columbia’s Montney fairway. They are also studying the potential to export liquefied natural gas (LNG) from Prince Rupert.
Waterous said such investments are a good way to “diversify the off-take markets” for Canadian energy products.
He predicted the “majority” of Canadian gas will be sent overseas once export capacity materializes on the country’s West Coast.
Apache Corp. and Shell Canada Ltd. have each proposed terminals to export western gas from Kitimat, B.C.
Those projects will fare better than their counterparts in the United States, Waterous suggested, because energy exports are “still politically difficult” in Washington.
“The U.S. government is not going to be able to take advantage of the growing Asian market,” he said.
Cheniere Enregy is currently the only U.S. company with a license to export gas to both free- and non-free trade countries. Barclays Capital yesterday initiated coverage of Houston-based Cheniere with a price target of $16. One of the “biggest risks” facing the company is the potential “revocation of the government approval to export gas,” the bank told clients in a note.