Canadian Lawyer

LEGAL REPORT/M&A Canadian climate warms for foreign investment Recent decisions on the CNOOC and Petronas deals appear to have provided needed clarity to spur more deals. By Judy van Rhijn 40 F e b r uary 2013 www.CANADIAN removed the chilling effect of the rejection of a bid by BHP two years ago. Despite Prime Minister Stephen Harper's assurance these would be the last full-scale takeovers in the oil sands industries by foreign state-owned enterprises — except in "exceptional circumstances" — the response from foreign investors has been almost universally positive. Ungerman says the decisions have put parameters in place for SOEs, although there are still no clear lines in the sand. "Taking a broader view, they say that Canada is ripe for business, as it has always been." Oliver Borgers, a competition lawyer at McCarthy Tétrault LLP, says the rejection of BHP — in addition to creating uncertainty — put a dampener on foreign investment by making foreign clients wor- L a w ye r m a g . c o m ried about getting a fair hearing and clearance. "Leaving aside the SOE and the oil sands issue, the CNOOC announcement has reinvigorated optimism in investing in Canada. It's only bad for SOEs with their hearts set on taking over an oil sands operator, or oil sands operators with their hearts set on being taken over by an SOE." Joyce Lee, co-chairwoman of McCarthy's China practice, notes the decision was very specific to the oil and gas industry. "Taken out of context, it sounds like the end of foreign investment. That's not the case." In fact, the new climate is seen by many as an opportunity to be creative with the structure of the transaction. A week after the CNOOC decision, PetroChina announced a joint venture with Encana Corp. that saw it acquiring pierre paul pariseau A fter a spotty year in Canadian mergers and acquisitions, the deal flow is up and foreign investment has been reinvigorated. For reasons internal and external, law firms are experiencing a pick-up in activity during 2013, with stalled deals coming back on the table and new interest from enthusiastic clients. Troy Ungerman, co-chairman of mergers and acquisitions at Norton Rose Canada LLP's Toronto office, reports significant inbound and outbound transactions are underway. "Companies that were sitting on their money last year, watching the economy blip up and down, are now opening up their coffers." He believes concerns in the U.S. over the "fiscal cliff" — the introduction of taxes on high net worth individuals and corporations — have been of benefit to Canada. "There was a lot of restructuring and internal reorganizations before the end of the year." He also points to the emergence of representation warranty insurance as a new development in deal negotiation that is boosting confidence and boldness. "Sellers and buyers are increasingly concerned about making representations and the liability attached. This insurance protects the representations and warranties in agreements and breaks logjams in transactions. At present the product is being bandied about in the U.K. and U.S. and I can't imagine we're too far behind." Within Canada, the catalyst for a burst of activity was the December approval of CNOOC's purchase of Nexen Inc. and Petronas' purchase of Progress Energy Resources Corp. Their approval

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