By Paul Vieira
OTTAWA--Canada's antitrust watchdog said Tuesday it is seeking to quash Keyera's proposed deal for Plains All American Pipeline's Canadian natural-gas business on worries the acquisition would entrench control over critical energy infrastructure.
The Competition Bureau said the planned $3.7 billion transaction would reduce competition at a crucial natural-gas liquids-processing hub in Fort Saskatchewan, Alberta. The bureau said Canadian producers rely on that hub to process natural-gas liquids into specific products, and to store them.
Natural-gas liquids are a byproduct of natural gas. Ethane, propane and butane are all considered natural-gas liquids, and are used as inputs for petrochemical plants, and cooking and heating. They are also blended in with gasoline for automobiles.
The Keyera-Plains deal would reduce the number of major integrated service providers at the hub from three to two, the bureau said. "There is insufficient remaining competition to constrain a post-merger exercise of market power by Keyera," lawyers for the bureau said in a filing to the Competition Tribunal, Canada's antitrust judicial body. "Increased market power would allow Keyera to raise prices for producers, reduce choice, and offer worse contractual terms."
In a statement, Keyera said Canadian authorities informed the company of the legal challenge prior to the opening of markets on Tuesday. The company said it disagrees with the bureau's "assertions and characterization of the transaction, and intends to respond."
The company added the bureau's legal filing does not prevent the closing of the deal, and that both Keyera and Plains "remain fully committed to completing the transaction" this month. A senior Competition Bureau official concurred during a briefing with reporters.
However, the future of a post-deal Keyera is contingent on winning a favorable ruling from the Competition Tribunal. In theory, the tribunal could reject the bureau's application; could allow the Keyera-Plains deal to proceed so long as Keyera agrees to sell certain assets; and, finally, could order the unwinding of the Keyera-Plains transaction. Lawyers for Keyera and Plains have 45 days to file their responses, according to the bureau's filing.
A spokesperson for Plains didn't respond to a request for comment.
Shares in Keyera fell more than 7% in trading Tuesday on the Toronto stock exchange on heavier-than-usual volume, while Plains' stock price was roughly unchanged in Nasdaq trading.
Canadian policymakers have encouraged a more rigorous interpretation of antitrust laws amid criticism that a concentration in key industries has limited competition and weighed on the country's productivity. Last week, Canada's Finance Minister Francois-Philippe Champagne ordered government departments to remove policies that impede competition.
Keyera's planned takeover, unveiled in June of last year, would establish a natural-gas-liquids corridor in Canada for the company, with assets that include extraction, fractionation and storage operations, as well as rail and truck terminals. The company has said the move would allow it to be more competitive in the services it offers and in terms of reliability, while bringing an opportunity to cut costs.
Keyera on Tuesday championed how this deal represented a win for Canada, because the acquisition from U.S.-based Plains would bring key natural-gas infrastructure under domestic ownership, "reinforcing long-term energy security and enabling continued domestic investment and job creation."
Keyera said the transaction is being financed through previously-issued subscription receipts and debt, alongside cash on hand.
Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
05-05-26 1705ET
