Consolidation was the recurring theme in 2017 Canadian M&A. In certain sectors facing disruptors and high costs, it took two large competitors to team up. In other sectors, it meant two purchasers coming together to acquire at least a third company.
1. POTASHCORP AND AGRIUM MERGE TO FORM NUTRIEN
This merger of equals was announced by Potash Corp. of Saskatchewan Inc. and Agrium Inc. in 2016. The deal closed on January 2, 2018, with the merger creating Nutrien, which has an enterprise value of $36 billion.
Bill Braithwaite led the team at Stikeman Elliott LLP, which included Mike Devereux for PotashCorp and its General Counsel, Joe Podwika. Braithwaite says the team worked on “the biggest true ‘merger of equals’ in Canadian history, [and] it also gave the deal team a chance to help create — essentially like an IPO — a new western Canada-based global giant.”
Ross Bentley led the team at Blake, Cassels & Graydon LLP for Agrium.
Michael Kandev, who led the Tax team for PotashCorp at Davies Ward Phillips & Vineberg LLP with Nathan Boidman, says: “Conceptually, a merger of equals can be effected contractually or structurally. The former would see each corporate group remain legally separate but ‘merged’ by contractual agreements including profit equalization arrangements. A corporate-structural merger was instead chosen.”
2. CENOVUS ACQUIRES CONOCOPHILLIPS ASSETS FOR C$17.7B
Calgary-based Cenovus Energy Inc. was “bulking up in a C$17.7-billion deal to more than double its production as the repatriation of Canada’s oil sands winnows control of the resource to a handful of domestic players,” according to The Globe and Mail.
Jeff Bakker from Blakes, co-counsel to Cenovus Energy Inc., says this “was the largest energy asset acquisition ever undertaken in Canada.”
Pat Maguire at Bennett Jones LLP says, “The acquisition provides Cenovus with full control over its oil sands operations and current and potential future growth projects at Foster Creek, Christina Lake and Narrows Lake, doubles the Corporation’s oil sands production, almost doubles its proved bitumen reserves and provides Cenovus an additional growth platform.”
Janice Buckingham, of Osler, Hoskin & Harcourt LLP, counsel to ConocoPhillips, says this “strategic sale to Cenovus was significant not only in terms of absolute dollar value, at C$17.7 billion, but in terms of maximizing value in a low-price environment.”
3. BCE ACQUIRES MANITOBA TELECOM SERVICES
In March 2017, BCE Inc. announced the launch of Bell MTS following its acquisition of Manitoba Telecom Services (MTS). The C$3.1-billion deal closed after considerable efforts on the regulatory side.
BCE said it picked up a total of 710,000 wireless, TV and internet customers. Winnipeg will serve as BCE’s headquarters for Manitoba, Saskatchewan, Alberta and British Columbia.
Blakes was Competition counsel to BCE, led by Brian Facey, who says, “As part of the deal, Bell MTS will invest [C]$1 billion over five years to upgrade the wireless network to LTE advanced and build fibre connections.”
4. PEMBINA ACQUIRES VERESEN
Pembina Pipeline Corp. announced the completion of its transaction with Veresen Inc. pursuant to a plan of arrangement under s. 193 of the Business Corporations Act (Alberta).
Pembina acquired all of the issued and outstanding common shares of Veresen in a transaction valued at approximately C$9.4 billion.
Chad Schneider of Blakes, which was counsel to Pembina, says: “The transaction creates one of the largest energy infrastructure companies in Canada and expands Pembina’s reach in the United States.”
5. CI FINANCIAL ACQUIRES SENTRY INVESTMENTS
CI Financial Corp. acquired Sentry Investments Corp., valued at C$780 million in cash and stock.
In combining two of Canada’s largest independent active asset-management firms, Jeff Lloyd of Blakes, counsel to CI Financial Corp., says, “The acquisition has increased CI’s AUM [assets under management] to approximately [C]$140 billion and total assets [assets under management plus assets under advisement] to approximately [C]$181 billion, and created one of the largest Canadian sales forces in the industry.”
6. TOTAL ENERGY SERVICES ACQUIRES SAVANNA ENERGY SERVICES
Total Energy Services Inc., a diversified oilfield services company based in Calgary, purchased all of the outstanding common shares of Calgary-based oilfield services company, Savanna Energy Services Corp., by way of an unsolicited take-over bid on December 9, 2016.
On March 1, 2017, Total filed a Notice of Change and Notice of Variation to the Offer to, inter alia, increase the consideration payable for each Savanna Share to C$0.20 in cash plus 0.13 of a Total common share. On March 9, 2017, Savanna announced that it had entered into an agreement with another publicly traded oilfield services company, which would acquire all of the Savanna Shares pursuant to a plan of arrangement.
Notwithstanding this competing transaction, on March 24, 2017, Total acquired 60,952,797 Savanna Shares under the Offer, representing approximately 51.6 per cent of the total number of outstanding Savanna Shares. It extended the Offer to April 7, 2017, which was subsequently extended to April 27, 2017, at which time Total owned approximately 86 per cent of the issued and outstanding Savanna Shares.
Nicholas Fader, a Calgary partner at Bennett Jones LLP, which acted for Total Energy, says this “bid represented the first successful unsolicited take-over under the new Canadian bid rules.”
7. SMARTREITAND STRATHALLEN ACQUIRE ONEREIT
According to Marketwired’s release, “OneREIT is an unincorporated, open-end real estate investment trust with more than C$1 billion of total assets,” and “SmartREIT is one of Canada’s largest real estate investment trusts with total assets of approximately C$8.9 billion. Strathallen Capital is a fully integrated Canadian real estate management company.
“OneREIT entered into separate agreements with Smart Real Estate Investment Trust and Strathallen Acquisitions Inc., an affiliate of Strathallen Capital Corp., to acquire all of OneREIT’s assets and assume all of its liabilities, including long-term debt and all residual liabilities, whereupon OneREIT redeemed all of its publicly traded units.”
Acting for OneREIT was a Fasken Martineau DuMoulin LLP team led by Jon Levin and including Anil Aggarwal. Levin says, “In part, the transaction reflects the adverse impact on the Canadian retail real estate landscape of ecommerce, particularly as evidenced by the lengthy and difficult auction process.”
8. THE NORTEL GLOBAL SETTLEMENT
Nortel kept has kept lawyers of all genres busy for years; last year it was one of Lexpert's Top Cases. “I’ve been involved in the Nortel case since the fall of 2008,” says Jay Carfagnini of Goodmans LLP, which represented the Monitor, Ernst & Young. Nortel drew in many law firms, courts, meetings and multiple jurisdictions.
According to Torys LLP, which acted for Nortel, with a team led by Tony DeMarinis and Scott Bomhof, “Nortel’s multi-jurisdictional business, unprecedented legal issues, and eventual big cash stockpile made the restructuring both exceptionally challenging and fascinating, and a case the likes of which may not be seen again for some time.”
The Nortel case/deal was re-fueled by an infusion in 2011 that took most observers by surprise. As reported in The Guardian, “The Apple, Microsoft, Sony and BlackBerry maker Research in Motion are part of a winning consortium of six companies which have bought a valuable tranche of patents from the bankrupt Nortel Networks patent portfolio for $4.5bn (£2.8bn), in a hotly contested auction that saw Google and Intel lose out.”
D.J. Miller, a partner at Thornton Grout Finnigan LLP offers this explanation for why the decision made the deal:
“The Global Settlement in Nortel announced on October 12, 2016, became somewhat inevitable after the Ontario Court of Appeal (OCA) issued 42-page written Reasons on May 3, 2016, dismissing an application by the bondholders and US debtor estate for leave to appeal the pro rata allocation decisions issued by the Canadian and US courts.”
The matter was referred to the highest appeal court in Delaware for determination. “Had a US Appeal court reached a different conclusion than the OCA, it would have left the parties in limbo with no means to allocate the $7.3 billion in global proceeds and further costs being incurred, since any allocation required a consistent decision of the Canadian and US courts.”
9. STELCO RESTRUCTURING
Another perennial favorite on Lexpert lists is the restructuring of Stelco Inc. It had been operating under the protection of the Companies’ Creditors Arrangement Act (CCAA) since being granted an initial stay of proceedings in September 2014. On June 9, 2017, the court approved its restructuring under the CCAA. On June 30, Bedrock Industries Group LLC announced that its acquisition of Stelco was closed.
McCarthy Tétrault LLP’s James Gage, counsel to Stelco, says, “The successful restructuring of Stelco was a significant achievement for the company and its key stakeholders.”
Added Michael Amm of Torys LLP, counsel to a syndicate of underwriters led by Goldman Sachs and BMO Capital Markets: “The successful IPO demonstrated how an innovative restructuring transaction can transform an iconic company and return it to the public capital markets.”
10. PARKLAND FUEL ACQUIRES CHEVRON CANADA’S DOWNSTREAM FUEL BUSINESS
Chevron Corp. sold its Canadian gasoline stations and refinery in BC to Parkland Fuel Corp., a marketer of petroleum products, for C$1.46 billion.
Sven Milelli, leading McCarthy Tétrault LLP’s M&A team for Parkland wrote, “This was a transformational deal that cements Parkland’s status as Canada’s leading fuel retailer while strategically expanding its supply infrastructure with the acquisition of the iconic Burnaby Refinery and related marine terminals.”