The two-stage merger review process was introduced as part of changes to the Competition Act during the federal budget in January and was made into law in early March. It has been criticized by lawyers who specialize in mergers and acquisitions, saying a similar system has added millions of dollars to the costs of transactions in the United States.
“The biggest challenge at the moment is trying to discern the bureau’s communications and draft guidelines. . . . Trying to determine how broad they may make a second request,” says John Carleton, the Macleod Dixon LLP Calgary partner heading up Competition Act compliance for Petro-Can on the deal.
“In any case we certainly haven’t received one yet, but being prudent, we’re well prepared for that in trying to understand how broad that might be.”
Under the new two-stage, or second-request, process, the initial review will take 30 days, in this case until April 29, and give the commissioner of competition the power to require a second period that lasts for an additional 30 days after full compliance of a request for documents. Draft merger review guidelines were released on March 24.
Prior to the new law, Canada employed a merger review system that could take a maximum of 42 days — absent court orders or agreements. The competition commissioner could go to the Competition Tribunal to seek a continuance if she could show she needs more time to conduct an inquiry into the merger.
The new system means the commissioner does not need to seek permission from the tribunal, and could delay the closing of any transaction through the second request, without judicial oversight.
Carleton says, in the U.S. the second request is used to delay for time by the reviewing agency. He says, to date, Canada’s Competition Bureau has been working with him and his clients to understand the issues they may raise. This is taking place on a rolling basis and may, in fact, lessen the need of a second request.
“This process is new for them as it is new for us,” he says. “We are seeing them trying to define their processes and trying to determine their own parameters when they are seeking information.”
Carleton is part of the Macleod Dixon team working on the deal. Suncor has brought in Blake Cassels & Graydon LLP as outside counsel on the deal. No one from that firm was available for comment for this article.
Carleton says as with any complex corporate deal the involvement of in-house counsel is important. However, the role in-house will play in any two-stage merger review is even more critical, saying they can translate what outside counsel need into the unique language corporations use in organizing their information technology departments.
“The expectation in result of any supplemental information request is it has the potential to be very broad and it has the potential to involve a great deal of personnel of the organization,” says Carleton.
“Understanding who would constitute the correct personnel and understanding the availability of information the manner in which the organization keeps its information, are all critical issues to preparing for any second request, and in-house counsel is critical to that.”
On March 23, Suncor and Petro-Canada announced they agreed to merge the two companies and operate corporately and trade under the Suncor name. According to the press release announcing the deal, the newly merged company “would maintain the strong brand presence and customer loyalty of Petro-Canada in refined products.”
“This merger creates a made-in-Canada energy leader with the assets, cost structure, and financial strength to compete globally,” said Suncor president and chief executive officer Rick George at the time.
George will hold the same position and title in the merged company. The deal is said to be worth $19.2 billion.
