Petro-Canada to seek repeal of limit

OTTAWA (Reuters) - Suncor Energy Inc (SU.TO) and Petro-Canada PCA.TO have agreed in their takeover accord to try to get the government to repeal a federal law that limits how big a stake in Petro-Canada a single shareholder can own.

"The parties covenant and agree that they shall cooperate 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.

Meantime, the companies have agreed that the Petro-Canada Act, which limits individual shareholdings to 20 percent, would apply to the combined company after Suncor completes its takeover of Petro-Canada.

"The parties hereby acknowledge that the Petro-Canada Act will apply to (the combined company)," the statement said in language similar to that used by the companies' chief executives on Monday in public comments.

The companies announced Suncor's C$18.4 billion (10.2 billion pound) takeover of Petro-Canada on Monday, and Finance Minister Jim Flaherty said on Tuesday morning that the deal was a "good thing" that was important for Canada overall.

The shareholding legislation is widely thought to have limited rises in Petro-Canada's stock, which has traded lower than that of its rivals because the law reduced the chances of a takeover, and the same handicap could now apply to the merged company unless it is removed.

Petro-Canada started as a government company in 1975, and the Petro-Canada Public Participation Act was put in place as it started to be denationalized in the 1990s to ensure widespread shareholding.

Even if the minority Conservative government were persuaded to support repeal of the act, it would still have to get the support of at least one of the three opposition parties -- all to the left of the Conservatives -- to do so.

($1=$1.22 Canadian)

(Reporting by Randall Palmer; editing by Peter Galloway)