Nationalist OR Protectionist

[Tree]

Hession appears to have IOC survive as an LNG player.  How best to prevent a hostile takeover?  Have the Gov't on your side.

"Here is our full development plan......protect us from a takeover and we implement it.  We get taken over and PNG can expect a couple year delay of E/A development"

Maybe, just maybe, this legislation has been fast-tracked to protect IOC, OSH and those other PNG Co's from takeovers by multi-nationals which may not operate in the best interest of PNG.

PNG moves to restrict foreigners owning shares

• ROWAN CALLICK
• THE AUSTRALIAN
• OCTOBER 28, 2013 12:00AM

A new Papua New Guinea law says that foreign share purchases must be in the national interest. Picture: Kym Smith Source: TheAustralian

THE Papua New Guinea government has moved to limit the operations of foreign companies and individuals in its economy.

It has amended the Takeovers Code to include a new, undefined "national interest" test that its Securities Commission must apply to the acquisition of any shares.

The new restriction says that the commission "shall issue an order preventing a party from acquiring any shares, whether partial or otherwise, under this code if the commission views that such acquisition or takeover is not in the national interest of PNG".

In a note on the change, Norton Rose Fulbright lawyers Anthony Latimer, Steve Johns and Steven Moe warn that the new amendment "has the potential to discourage foreign investment in PNG companies and is likely to have a negative impact on the share price of such companies".

Tevita Gonelevu, chief executive of Fiji Television, the owner of PNG's national TV broadcaster, EMTV, said senior ministers had discussed the government's intention of limiting the foreign ownership of media.

He said: "They would be enacting a law, something like the Fiji Media Decree, where (the media) would be majority owned by locals."

This would affect every major mass media organisation in PNG, except for the government's radio broadcaster, the National Broadcasting Corporation.

It would concern not only EMTV -- until 2005 owned by the Packer company Publishing and Broadcasting -- but also the two daily newspapers, the 44-year-old Post-Courier, 63 per cent owned by News Corp (publisher of The Australian) and The National, owned by Malaysian conglomerate Rimbunan Hijau, and three FM radio stations owned by Fiji Communications.

The Norton Rose Fulbright paper says of the new "national interest" test for all share purchases: "There are no guidelines or formal tests for determining what is in the national interest of PNG or when a takeover or other acquisition of shares will be deemed not in PNG's national interest. In short, the Securities Commission is left with a wide discretion to decide when or if a takeover is not in PNG's national interest."

The amendment has already been used to block one high-profile transaction.

The government has barred blue-chip Malaysian agribusiness Kulim from extending its stake in New Britain Palm Oil (NBPOL), PNG's leading rural corporation, from 49 per cent to 69 per cent for about $250 million.

PNG Trade, Commerce and Industry Minister Richard Maru claimed in announcing the block on Kulim that 90 per cent of the economy was controlled by foreigners. "As a responsible government we're going to take some very drastic steps to create more opportunities for our own citizens to enjoy the wealth of our nation."

He said not only had the government blocked Kulim's move to lift its investment, but it would "ask Kulim to sell down some of its shares to the respective provincial governments where the assets of NBPOL are located".

The new national interest test applies to any company, domestic or foreign, registered under the PNG Companies Act, that is listed on any stock exchange or has assets of more than 5 million kina ($2m), more than 25 shareholders and more than 100 staff.

The amendment prohibits anyone involved in the acquisition from taking any action that is perceived as contravening an order made by the Securities Commission.

Mr Maru said that in "sectors of national interest", including agriculture, "only Papua New Guineans, or over 51 per cent nationally owned companies, will be allowed to operate".

[Movieguy]

I was told by WA without hesitation that the government would have no problem with IOC being taken over. This was some months ago. Perhaps things have changed, or perhaps he was wrong, but I believe this new act by the PNG government is not meant to prevent a takeover of IOC, as long as the government respects the buyer. They are probably happier (or no less happy) with a more experienced, deep-pocketed company like an SM.

[jft310]

The SM history on PNG is just not good. IOC is considered a local company.How this might impact IOC ?I conclude positively. To me this would rule out a low ball offer. Every company is or sale but its the price that matters whether one gets a deal or not.

[Tree]

I was told by WA without hesitation that the government would have no problem with IOC being taken over. This was some months ago. Perhaps things have changed, or perhaps he was wrong, but I believe this new act by the PNG government is not meant to prevent a takeover of IOC, as long as the government respects the buyer. They are probably happier (or no less happy) with a more experienced, deep-pocketed company like an SM.

I did not claim this act was to prevent takeover of IOC.  This Takeovers Code amendment protects PNG further from foreign investment in PNG.

Point is, if RDS were to takeover IOC would RDS still want to sell 4.6 T's to XOM?  Don't think so.  Would a SM be keen on running IOC's refinery and problematic retail distribution?   A delayed or scrapped PNG LNG expansion would not be in PNG's best interest.  Best outcome for PNG looks like both PNG LNG expansion and Gulf LNG Project as well as IOC's continued dedication to refining, distribution and community support.

At worst, I view this Takeovers Code amendment as protection for IOC's sovereignity.

[CAC]

I was told by WA without hesitation that the government would have no problem with IOC being taken over. This was some months ago. Perhaps things have changed, or perhaps he was wrong, but I believe this new act by the PNG government is not meant to prevent a takeover of IOC, as long as the government respects the buyer. They are probably happier (or no less happy) with a more experienced, deep-pocketed company like an SM.

I did not claim this act was to prevent takeover of IOC.  This Takeovers Code amendment protects PNG further from foreign investment in PNG.

Point is, if RDS were to takeover IOC would RDS still want to sell 4.6 T's to XOM?  Don't think so.  Would a SM be keen on running IOC's refinery and problematic retail distribution?   A delayed or scrapped PNG LNG expansion would not be in PNG's best interest.  Best outcome for PNG looks like both PNG LNG expansion and Gulf LNG Project as well as IOC's continued dedication to refining, distribution and community support.

At worst, I view this Takeovers Code amendment as protection for IOC's sovereignity.

********

Artificial "protection" that may not be needed or wanted.  If RDS wants to buy IOC for $150 why would IOC need PNG legislation to help them prevent it. They're big boys. They have a poison pill and the shareholders could just say "no thanks".  On the other hand, what if RDS wants to buy IOC for $250; the Board and shareholders think it sounds good; and then PNG says no?

This legislation seems like a negative to me.

[Palm]

As this article better explains, this move by PNG is not much different than other countries do. In fact it's very similar to laws in Australia, as you would expect. The US and Canada have recently used this type of law to prevent Chinese buyouts of strategically important companies. Gives a government the ability to protect national interests if necessary.

"Presenter: Geraldine Coutts

Speaker: Professor Stephen Howes from the Australian National University

HOWES: It has been reported in PNG but I guess it just shows there's not that much reporting of what goes on in PNG here in Australia, and in the rest of the region. And so it was the article in The Australian yesterday I guess that's given it a much higher profile.

COUTTS: And can you explain the significance of the law changes that came about in August?

HOWES: I think the law change itself is not that controversial or surprising. Australia has a similar provision that if there's a takeover by a foreign company of a big Australian business then the government has to apply a national interest test to prove or reject the takeover, which is the change that PNG's introduced. So I think it's not the law change itself that's so surprising, but it's more the context in which it's occurred and the fact that it goes together with a number of other recent moves which do suggest policy in PNG is becoming more nationalistic and sort of less favourably disposed to foreign investment.

COUTTS: That's good for PNG?

HOWES: I'm not saying it's good for PNG, no, I think of course PNG needs foreign investment. So it needs to be very careful about discouraging foreign investment. I guess my point is that the change itself I think without knowing all the details, but simply introducing a national interest test on foreign takeovers, that it itself I think is not that controversial. A number of other countries have a similar provision. But what is worrying is the context in which it's occurred, which is that there was already a takeover offer on the table. It was by the Malaysian company Kulim for the New Britain Palm Oil corporation, which is PNG's biggest employer, and they already had 49 per cent of the shares, in the past they've actually had more than 50 per cent, in fact for quite a long time. So it's not clear why PNG government's decided that it doesn't want it again to go above 50 per cent. It was a controversial bid, it was one that actually the board had rejected, and it was one that had very few takers. So it would have been quite easy for the PNG government just to leave this to commercial means to resolve, but some for reason they decided they needed to intervene. And that seems to have been the motive for passing this act and then making this decision that it wasn't in the national interest."

Since this is a recent thing and in light of the OK Tedi situation there is concern, but O'Neill is a smart guy and he is pro-business and knnows foreign investment is hugely important. He's doing the wise thing; lay down a heavy line, then deal with situations as they come.

[jft310]

I was told by WA without hesitation that the government would have no problem with IOC being taken over. This was some months ago. Perhaps things have changed, or perhaps he was wrong, but I believe this new act by the PNG government is not meant to prevent a takeover of IOC, as long as the government respects the buyer. They are probably happier (or no less happy) with a more experienced, deep-pocketed company like an SM.

I did not claim this act was to prevent takeover of IOC.  This Takeovers Code amendment protects PNG further from foreign investment in PNG.

Point is, if RDS were to takeover IOC would RDS still want to sell 4.6 T's to XOM?  Don't think so.  Would a SM be keen on running IOC's refinery and problematic retail distribution?   A delayed or scrapped PNG LNG expansion would not be in PNG's best interest.  Best outcome for PNG looks like both PNG LNG expansion and Gulf LNG Project as well as IOC's continued dedication to refining, distribution and community support.

At worst, I view this Takeovers Code amendment as protection for IOC's sovereignity.

********

Artificial "protection" that may not be needed or wanted.  If RDS wants to buy IOC for $150 why would IOC need PNG legislation to help them prevent it. They're big boys. They have a poison pill and the shareholders could just say "no thanks".  On the other hand, what if RDS wants to buy IOC for $250; the Board and shareholders think it sounds good; and then PNG says no?

This legislation seems like a negative to me.

CAC - the PNG govt is broke . One solution if IOC rose to $250 would be for them to sell some. Selling all of IOC with this team that found these assets where the majors failed would be silly

[Getitrt2]

Personally, I think such PNG laws are irrelevant with respect to a potential takeover of a Canadian registered, NYSE listed company like IOC. Is New Britain Palm Oil a PNG company?

[Stavros]

Amen Getit.

The law is irrelevant in the same way that PNG cannot prevent a takeover of XOM, Oil Search, Santos, or any other foreign-based company who happens to be doing business in PNG.

[sydbod]

Amen Getit. The law is irrelevant in the same way that PNG cannot prevent a takeover of XOM, Oil Search, Santos, or any other foreign-based company who happens to be doing business in PNG.

Oil Search Limited is the largest oil and gas exploration and development company incorporated in Papua New Guinea