Nexen shares jumped 14.2 percent to C$26.59 after the federal government approved CNOOC Ltd's $15.1 billion bid. Progress Energy Resources Corp, whose $5.3 billion takeover by Malaysian state-owned energy company Petronas was also approved, surged 13.4 percent to C$21.96.

Gains in the two stocks and the broader energy sector outweighed the impact of new restrictions on some investments in the oil sands sector that hurt shares of some smaller players.

Canada on Friday approved the landmark bid from CNOOC, China's third-largest oil company. But the Conservative government said it would block virtually all new attempts by foreign state-owned enterprises to buy assets in the sector.

"It was a well-crafted decision. Overall people are satisfied. The primary concern here revolves around the fact that state-owned enterprises are, unlike free-market companies, competing with an unfair advantage," said Michael Sprung, president of Sprung Investment Management.

"I think Canada is open for business," he added.

The Toronto Stock Exchange's S&P/TSX composite index was up 48.70 points, or 0.40 percent, at 12,208.29. Nine of the 10 main sectors on the index were trading higher.

The energy sector was up about 1 percent, leading the market.

However, shares of some companies active in the oil sands sector declined over concerns about more limited investment.

Suncor Energy Inc, Canada's largest energy company and a dominant oil sands producer, fell 0.6 percent to C$32.04 and played the biggest role of any single stock in weighing on the market.

Smaller oil sands players were also hit. MEG Energy Corp was down 2.5 percent at C$33.86. Canadian Oil Sands Ltd fell 0.7 percent at C$19.85 and Athabasca Oil Corp lost 0.8 percent to C$10.17.

"People are worried about the capital that's going to be available in the oil industry. Certainly there has been a ring drawn around the oil sands," Sprung said.

Investors might view smaller oil sands companies as being shut out from a foreign takeover at a premium price, Sprung said.

Center>Copyright Reuters, 2012