Archive for the 'Mergers' Category
On June 13, 2011, the Maple Group Acquisition Corp., a consortium of 13 Canadian financial institutions, launched a Cdn. $3.7 billion hostile bid to acquire 70% of the TMX Group Inc. for $48 per share.
(Maple is composed of 13 banks, pension funds and institutional investors: Scotia Capital Inc., TD Securities, National Bank of Canada, Canadian Imperial Bank of Commerce, Alberta Investment Management Co., Caisse de depot et placement du Quebec, Canada Pension Plan Investment Board, Ontario Teachers’ Pension Plan Board, Fonds de Solidarite FTQ, Manulife Financial Corp., Dejardins Financial Group, GMP Capital Inc. and Dundee Capital Markets.)
According to the Globe and Mail and other media reports, the Maple bid is a cash and share offer with Maple valuing its offer for TMX at Cdn. $3.7 billion ($2.5 billion in cash with the balance in Maple shares or Cdn. $33 cash per share plus Maple shares).
The launch of the rival Maple bid follows the earlier proposed friendly TMX/London Stock Exchange Group (LSE) merger and also follows in the wake of a recently abandoned joint bid by the NASDAQ OMX Group Inc. and IntercontinentalExchange Inc. last month to acquire the NYSE Euronext, following a decision by the U.S. Department of Justice to block the transaction (see: NASDAQ OMX and IntercontinentalExchange Abandon Acquisition of NYSE Euronext).
In the failed NASDAQ/NYSE transaction, it appears from public statements by U.S. regulators that their concerns included overlap in several relevant markets, including stock listing services, stock auction services (used at the open and close of trading and periodically during market imbalances) and trade reporting facilities (used for the reporting of stock trades occurring outside of a stock exchange).
It is not yet clear whether the Maple hostile bid for the TMX will raise substantive competition law issues for the Bureau of the kind that resulted in the failed NASDAQ/NYSE transaction, or for the parties to the Maple/TMX transaction to avoid the imposition of remedies if successful.
Potential competition concerns include Alpha/TMX overlap in trading or market information services (five Maple investors have existing holdings in Alpha), Alpha having been described as “the TMX’s biggest domestic competitor” and “Canada’s main alternative trading platform” in the stock trading market. The TMX itself described Alpha in its 2010 Annual Report as having posed the “largest competitive impact” on its trading business.
The integration of CDS, which handles the clearing of share trades and is Canada’s major stock clearing facility, with the TMX may also raise potential issues, based either on overlap with existing TMX clearing services or possible impacts on non-Maple investor customers. In this regard, Maple’s bank investors and the TMX hold interests in CDS.
In this regard, existing remaining competition is a key substantive factor for the Competition Bureau in merger review under the Competition Act (see: Competition Bureau, Merger Enforcement Guidelines).
It also remains to be seen whether the proposed entry of Alpha in the listing services market will be a concern for the Bureau – i.e., whether the Bureau may see the Alpha/TMX merger as essentially removing a potential new entrant.
Having said that, unlike some other major jurisdictions including the U.S. and EU, fully contested merger proceedings are generally speaking rare in Canada with most substantive issues being resolved through negotiated settlements with the Bureau – i.e., through the imposition of structural or behavioural remedies to alleviate competition law concerns (see: Competition Bureau, Information Bulletin on Merger Remedies in Canada).
Potential remedies in this case, in the event the Maple bid is successful, may include the divestiture of the Maple investors’ holdings in Alpha. If significant competition concerns are raised, “behavioural” remedies may also be possible – for example, steps to alter the Maple investors’ representation on the Alpha board or control provisions in Alpha shareholder agreements.
According to some media reports, Maple has in fact indicated that it may be willing to divest its interests in Alpha and CDS to obtain regulatory approval for the transaction.
With respect to the timing for the proposed transaction, the parties will be subject to an initial 30 day waiting period for a review of the transaction during which the Bureau may request additional information extending its review to a second phase review (or a timing agreement negotiated between the parties extending the time for the Bureau’s review, without the issuance of an additional information request).
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The Wall Street Journal has reported that the Competition Bureau has issued a no action letter in the proposed TMX Group Inc. / London Stock Exchange Group plc transaction.
According to the parties, the issuance of the no action letter satisfies the condition of their February 9th, 2011 merger agreement. For the TMX Group news release see:
TMX Group – London Stock Exchange Group Proposed Merger Receives Clearance from Competition Bureau
Under the Competition Act, merging parties may complete a proposed transaction that is notifiable when: an ARC is received (the strongest form of pre-merger clearance under the Act, typically issued in non-complex transactions where there are few or no issues); a “no action letter” is received, stating that the Commissioner does not at that time intend to seek a remedial order from the Competition Tribunal; or the applicable statutory waiting period has expired.
As a result of recent amendments, however, the Bureau may still challenge a transaction where a no action letter is issued (or the applicable statutory waiting period has expired, allowing the merging parties to complete) for up to one year post-closing.
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The following is a list of my presentations and speaking engagements.
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2012 – 2014
Adjunct professor, competition law, University of British Columbia, Faculty of Law (2007 – 2014)
Podcast, Is Your Social Media Contest Breaking The Law, TopDog Social Media
Guest lecture, Canadian misleading advertising law, UBC, Faculty of Law
Instructor, Competition Law and REALTORS, competition law compliance seminars for the Fraser Valley, Greater Vancouver, Vancouver Island, Victoria, South Okanagan, Kamloops real estate boards
Presenter, competition law compliance seminars for British Columbia, Ontario trade associations
Speaker, Strafford webinar, Key Canadian Advertising and Competition Law: Compliance Strategies
Speaker, Canadian Society of Association Executives (CSAE), National Conference 2012, Ottawa, Practical Competition Law and Compliance Case Studies for Trade and Professional Associations
Speaker, What In-house Counsel Need to Know About Recent Competition Law Developments, CBA Canadian Legal Conference, Vancouver, British Columbia (August 13, 2012)
Instructor and course author, Competition Law and REALTORS: What You Say and Do Matters
Speaker, webinar, Carswell, A Guide to Canadian Competition Law for Trade and Other Associations
2009 – 2011
Speaker, BCREA, Instructor Development Workshop, Amendments to the Competition Act & Recent Developments, Whistler, British Columbia
Speaker, BCREA Instructor Development Workshop, Amendments to the Competition Act & Current Issues, Vancouver, British Columbia
Instructor, Competition Law and REALTORS, competition law compliance presentations for the Okanagan Mainline, Kootenay, South Okanagan, Chilliwack real estate boards
Presenter, competition law compliance seminars for British Columbia trade associations
Speaker, lunch and learn seminar, Canadian Competition Law, for a Vancouver business law firm
Speaker, Governing the Use of Social Media in Your Organization, the Canadian Life and Health Insurance Association (CLHIA), Compliance Section Social Media Seminar, Toronto, Ontario
Guest lecture, Canadian competition law, Simon Fraser University
Speaker, Competition Law & REALTORS, pilot for ACRE/CREA national competition law course for REALTORS, BCIT, Vancouver, British Columbia
Conference chair and speaker, Canada’s Competition Act Amendments, Continuing Legal Education Society (CLE) of British Columbia, Vancouver, British Columbia
Speaker, joint International Academy of Law and World Council for Corporate Governance, International Conference on Competition Law: Competition Law – An Effective Instrument for Making Markets Work for Inclusive Growth, Delhi, India
Speaker, Overview of the New Competition Act and the New Investment Canada Act, Canadian Bar Association (CBA) luncheon, BC Branch, Vancouver, British Columbia
2002 – 2007
Speaker, Retail Sales & Competition Law, RetailBC seminar, Vancouver, British Columbia
Speaker, Canadian Competition Law & IP, presentation to a Chinese aviation industry trade delegation, Vancouver, British Columbia
Speaker, Mergers & Acquisitions, Competition Law Developments, Lang Michener presentation, Vancouver, British Columbia
Speaker, Abuse of Dominance & the Canada Pipe Case, Lang Michener presentation, Toronto, Ontario
Speaker, The Competition Act and You, six compliance seminars for members of the Real Estate Board of Greater Vancouver, Vancouver, British Columbia
Guest lecture, Intersection of IP & Competition Law, UBC, Faculty of Law
Guest lecture, Convergence Issues in Competition Policy and Intellectual Property Laws, UBC, Faculty of Law
Speaker, Competition Law Essentials, CLE BC seminar, Vancouver, British Columbia
Speaker, competition law compliance seminars for The Canadian Real Estate Association (CREA)
Speaker, 2005 joint CREA and National Association of REALTORS conference
Speaker, Co-operation & Competition: Being Ready for the Competition Bureau from an Association Perspective, Canadian Bar Association (CBA), Annual Competition Law Conference, Ottawa, Ontario
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For more information about our regulatory law services contact us: contact
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2013
Conference Board of Canada (Michael Grant), “Saskatchewan’s Growth Requires Billions in New Investment Capital”
University of Calgary, School of Public Policy (D. Chen), “China’s State-Owned Enterprises: How Much Do We Know? From CNOOC to its Siblings”
IRPP report, D.H. Assaf & R.A. McGillis, “Foreign Direct Investment and the National Interest: A Way Forward”
Y. Bao & G. Houlden, University of Alberta, China Institute, “The Evolution of China’s Energy Institutions” [includes discussion of Chinese SOEs]
University of Alberta, China Institute, A Look at the Net Benefit Test – Old and New: In Search of an Alberta Perspective with the China Market in Mind (R. MacIntosh)
N. Veldhuis, Fraser Institute, Comprehensive Review of the Investment Canada Act Desperately Needed
2012
Industry Canada, Guideline, Statement Regarding Investment by Foreign State-Owned Enterprises [New Industry Canada Policy Statement]
Industry Canada, Guideline, Guidelines – Investment by State-owned Enterprises – Net Benefit Assessment [New Industry Canada SOE Guidelines]
Dr. D. Ireland, “The CNOOC/Nexen Transaction in Canada: The Very Tip of a Very Large Future Iceberg – The Competition Issues Raised by State-Owned and Other Enterprises and Business Groups”
E. Downs, Brookings Institution, “China, Iran and the Nexen Deal”
CSIS, Public Report 2010-2011 [disusses Investment Canada Act, SOEs, national security]
C.D. Howe Institute report, Speed Dating or Serious Courtship? Canada and Foreign State-owned Enterprises
OECD, Working Paper, Unleashing Business Innovation in Canada
DBRS, Oil & Gas Industry Study: China Increases Investment in Canada: Statistical Review of Credit Metrics, 2007 to 2012 Q2
Canadian Government (Foreign Affairs and International Trade Canada), Canada-China Economic Complementarities Study
Canadian Security Intelligence Service, Public Report 2010-2011
J. Smart, University of Calgary, Dancing With the Dragon: Canadian Investment in China and Chinese Investment in Canada
Canadian Council of Chief Executives (CCCE), A Canadian National Economic Strategy for Asia
Michael Hart, C.D. Howe Institute, Breaking Free: A Post-Mercantilist Trade and Productivity Agenda for Canada
Canadian Council of Chief Executives (CCCE), Canada in the Pacific Century (Canada/Asia trade papers): papers
CBA, Letter to Parliamentary and Senate Standing Committees on Finance/National Finance, Bill C-38, Part 4, Division 28 – Investment Canada Act Amendments
Industry Canada, Annual Report 2009 – 2010
Australia-Canada Trade Investment Study
CCCE / Australia-Canada Investment Study
Saskatchewan Government, Review of the Proposed Glencore Acquisition of Viterra and Related Assets
Government of Canada, Budget 2012
CCCE, Chinese Foreign Direct Investment in Canada: Threat or Opportunity?
Margaret Cornish, Behaviour of Chinese SOEs: Implications for Investment and Cooperation in Canada
Federal Government trade delegation to China, documents
Canadian Chamber of Commerce, Advancing Our Economic Ties With China: Three Priorities for Canadian Business
ForestEthics, Who Benefits? An Investigation of Foreign Investment in the Tar Sands
2011
P. Bergevin and D. Schwanen, C.D. Howe Institute, Reforming the Investment Canada Act: Walk More Softly, Carry a Bigger Stick
Conference Board of Canada, Inward FDI Attraction: Is Canada Attracting Its “Fair” Share of Inward FDI?
Canadian Chamber of Commerce, Submission to the House of Commons Standing Committee on Industry, Science and Technology on its Study of the Investment Canada Act
Julie Jiang and Jonathan Sinton, International Energy Agency, “Overseas Investments by Chinese National Oil Companies”
Pascale Massot, Chinese State Investments in Canada: Lessons from the Potash Saga, Asia Pacific Foundation of Canada
Parliament of Canada, Foreign Investment in Canada: The Net Benefit Test
2010
Michael Holden, International Affairs, Trade and Finance Division, Canadian Trade and Investment Activity: Canada-China
Marc LeBlanc, Industry, Infrastructure and Resources Division, Parliament of Canada, “Sovereign Wealth Funds: International and Canadian Policy Responses”
Walid Hejazi, Dispelling Canadian Myths about Foreign Direct Investment
William K. Carroll, Jerome Klassen, Hollowing Out Corporate Canada? Changes In The Corporate Network Since the 1990s
Canadian Heritage, Report on the Administration of the Investment Canada Act (Canadian Heritage)
Saskatchewan Chamber of Commerce, Investment Canada Act and “Net Benefit”
2007 – 2009
CBA, National Competition Law Section, Investment Canada Regulation Amendments and National Security Review of Investments Regulations (2009)
Canadian Chamber of Commerce, Submission on the Regulations Amending the Investment Canada Regulations and National Security Review Regulations (2009)
Competition Policy Review Panel, Compete to Win: Final Report (2008)
Andrew Sharpe and Meghna Banerjee, Assessing Canada’s Ability to Compete for Foreign Direct Investment (2008)
Institute for Competitiveness & Prosperity, Assessing the Economic Impact of Head Offices in City Regions (2008)
Roger Martin and James Milway, Assessing the Potential Impact of a National Champions Policy on Canada’s Competitiveness (2008)
Keith Acheson, Canadian Foreign Direct Investment Policy and the Cultural Industries (2008)
Robert Crandall, Eliminating Foreign Investment Restrictions in Canada’s Telecommunications/Broadcast Sector (2008)
Steven Globerman, An Evaluation of the Investment Canada Act and its Operations (2008)
Dr. Dane Rowlands, Formal and Informal Barriers to Canadian FDI (2008)
Walid Hejazi, Inward Foreign Direct Investment and the Canadian Economy (2008)
Andrea Mandel-Campbell, Conference Board of Canada, “Foreign Investment Review Regimes: How Canada Stacks Up” (2008)
Keith Head and John Ries, Head Office Location: Implications for Canada (2008)
Derek Ireland, Implications of the BRIC Economies for Canadian Trade and Invesment (2008)
American Bar Association, Sections of Antitrust and International Law, Joint Submission in Response to the Request for Comments by the Canadian Competition Policy Review Panel (2008)
Don McFetridge, The Role of Sectoral Ownership Restrictions (2008)
Government of Alberta, Submission, Sharpening Canada’s Competitive Edge: A Consultation Paper Issued by the Competition Policy Review Panel, October 30, 2007 (2008)
L.R. Wilson, et al., Competition Policy Review Panel, Sharpening Canada’s Competitive Edge (2007)
Michael Holden, Economics Division, Parliament of Canada, The Foreign Direct Investment Review Process in Canada and Other Countries (2007)
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On May 23, 2011, the U.S. Department of Justice announced that it had filed a lawsuit to block H&R Block Inc. from acquiring TaxAct based on concerns that the proposed transaction would further consolidate the “growing U.S. digital do-it-yourself tax preparation software market” from 3 to 2 and eliminate a maverick (TaxAct).
In making the announcement, the U.S. DoJ said:
“’The combination of H&R Block and TaxACT would likely lead to millions of American taxpayers paying higher prices for digital do-it-yourself tax preparation products,’ said Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. ‘In addition, TaxACT has aggressively competed in the digital do-it-yourself tax preparation market with innovations such as free federal filing. If this merger is allowed to proceed, that type of innovation will be lost.’
…
According to the department’s complaint, H&R Block’s acquisition of 2SS Holdings would eliminate a company that has aggressively competed with H&R Block and disrupted the U.S. digital do-it-yourself tax preparation market through low pricing and product innovation. By ending the head-to-head competition between TaxACT and H&R Block, American taxpayers would be left with only two major digital do-it-yourself tax preparation providers. This would lead to higher prices, lower quality, and reduced innovation. In addition, by taking control of the TaxACT business, which has been a maverick in the market, it would be easier for H&R Block to coordinate on prices, quality, and other business decisions with the other remaining industry leader – Mountain View, Calif.-based Intuit, which makes personal finance programs such as Quicken and TurboTax – the department said.”
This case is interesting in that in addition to considering market shares and existing remaining competition (according to the DoJ, the top three players including H&R Block and TaxAct account for about 90% of the relevant market), the DoJ is basing its challenge on the fact that in its view TaxAct is also a maverick. Like the U.S., in Canada whether a merging party is a maverick can also be a relevant factor for considering whether competition will be substantially lessened post-merger (though, not surprisingly, whether a party is a maverick can be the subject of considerable debate and maverick cases are relatively rare). In this regard, the Competition Bureau states in its Merger Enforcement Guidelines:
“Pre-merger, effective coordination may be constrained by the activities of a particularly vigorous and effective competitor (a ‘maverick’). An acquisition of a maverick may remove this constraint on coordination by reducing incentives to behave in an aggressive manner. Such an acquisition increases the likelihood that coordinated behaviour will be effective.”
This case is also interesting, if only for being a cautionary tale, in that the DoJ is basing its challenge of the proposed transaction in part on the merging parties’ own internal documents. According to the DoJ, these include statements from H&R Block’s internal emails and presentations that a primary benefit of acquiring TaxAct is “elimination of a competitor” and the “strategic opportunities” include to “eliminate the brand to regain control of industry pricing and further price erosion”.
Given that “4c documents” are a routine and required part of merger notification in the U.S., and that strategic planning documents are also now required for merger notification filings in Canada regardless of complexity (see Notifiable Transactions Regulations, 16(1)(d)),[1] merging parties are well advised to seek competition/antitrust counsel early in the planning stages of a proposed transaction to avoid similar potential issues from arising.
For the complete DoJ news release see: Justice Department Files Antitrust Lawsuit to Stop H&R Block Inc. From Buying TaxAct.
For Canada’s merger control rules see: Competition Act, Part IX – Notifiable Transactions and Notifiable Transactions Regulations.
For an overview of merger control in Canada see: Merger Control and Investment Canada.
[1] Subparagraph 16(1)(d) of the Notifiable Transactions Regulations requires that parties to a transaction, and their affiliates, file “all studies, surveys, analyses and reports that were prepared or received by an officer or director of the corporation … for the purpose of evaluating or analysing the proposed transaction with respect to market shares, competition, competitors, markets, potential for sales growth or expansion into new products or geographic regions …” This requirement to file strategic planning documents as part of a pre-merger notification filing was recently added to the Canadian Notifiable Transactions Regulations as part of amendments to the Competition Act in 2009, and further aligns Canadian merger control rules with that in the U.S. under the HSR Act (the existing 4c documents requirement).
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The U.S. Department of Justice announced today that the NASDAQ OMX Group Inc. and IntercontinentalExchange Inc. have abandoned their joint bid to acquire NYSE Euronext, following a decision by the U.S. DoJ to block the transaction.
In making the announcement, Christine Varney, Assistant Attorney General in charge of the DoJ’s Antitrust Division said:
“The companies’ decision to abandon their bid for NYSE Euronext eliminates the competitive concerns developed during our investigation. … The acquisition would have removed incentives for competitive pricing, high quality of service, and innovation in the listing, trading and data services these exchange operators provide to the investing public and to new and established companies that need access to U.S. stock markets.”
Like Canada, transactions in the U.S. exceeding certain monetary thresholds are required to be pre-notified and obtain regulatory approval. In Canada, the pre-merger notification provisions of the Competition Act require both parties to specified types of transactions that exceed the statutory monetary thresholds under the Act to file pre-merger notification filings with the Competition Bureau.
Substantive Competition/Antitrust Concerns
It appears from the DoJ’s announcement that its concerns were based on overlap in several relevant markets, including for corporate stock listing services in the United States. According to the U.S. DoJ, the NYSE and NASDAQ are “effectively the only companies providing corporate stock listing services in the United States.”
In this regard, NYSE owns the New York Stock Exchange, the oldest stock exchange in the United States, while NASDAQ operates the NASDAQ Stock Market, the NASDAQ OMX BX (previously the Boston Stock Market) and the NASDAQ OMX PSX (previously the Philadelphia Stock Exchange).
Other relevant markets that appear to have been a concern for the DoJ included stock auction services, used at the open and close of trading and periodically during market imbalances, and trade reporting facilities, used for the reporting of stock trades occurring outside of a stock exchange, which according to the DoJ would have given the merged entity a monopoly post-merger (i.e., the NYSE and NASDAQ are currently the only two entities competing to collect this data).
For the DoJ news release see: Nasdaq OMX Group Inc. and IntercontinentalExchange Inc. Abandon Their Proposed Acquisition of NYSE Euronext After Justice Department Threatens Lawsuit.
For the Assistant Attorney General’s remarks see Remarks of Assistant Attorney General Christine Varney.
Maple Group Launches Rival Bid for TMX Group Inc.
The decision by NASDAQ OMX and IntercontinentalExchange to abandon their bid for the NYSE comes at the same time as a second rival bid has been launched by Maple Group Acquisition Corp. to acquire the TMX Group Inc. (see: TSX Will Prosper, Canadian Bidders Say). The London Stock Exchange Group PLC had already proposed a merger with the TMX worth about $40 a share.
While spokespersons for the rival bidder, a consortium of nine banks and pension funds, have been downplaying the regulatory approvals required for the bid, and in particular merger clearance, it is not clear that sufficient existing competition will remain to avoid behavioural or structural merger remedies being imposed if the rival bid is ultimately successful.
Existing remaining competition is both a substantive factor for merger review under the Competition Act and a key factor for the Competition Bureau in its review of proposed mergers (see for example the Bureau’s Merger Enforcement Guidelines).
In this regard, potential overlap includes the Alpha Group (a new trading system that may be seen as competing and overlapping with the TMX) and CDS Inc. (that handles the clearing of share trades).
On the other hand, the reality is that, unlike some other jurisdictions, fully contested mergers are rare in Canada with most substantive issues being resolved by way of negotiated settlements (i.e., remedies imposed by the merging parties) (see e.g., the Competition Bureau’s Information Bulletin on Merger Remedies).
Potential remedies in this case could include behavioural remedies partitioning existing bank-owned competing exchange facilities from the TMX or the divestiture of some existing bank-owned exchange assets.
One interesting aspect that will remain to be seen is whether existing bank-owned trading assets are seen as merely an incremental addition to the TMX share or whether any such assets are seen as a sufficiently vigorous new entrant as to pose more serious competition law concerns for the Bureau.
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February 1, 2011
The Competition Bureau announced earlier today that the pre-merger notification transaction-size threshold for 2011 will increase to CDN $73 million from the former 2010 threshold of CDN $70 million (see: 2011 Pre-Merger Notification Transaction-Size Threshold).
January 26, 2011
The Competition Bureau (the “Bureau”) has announced today that it has applied to the federal Competition Tribunal (the “Tribunal”) for a Tribunal order to dissolve (i.e., unwind) CCS Corporation’s acquisition of Complete Environmental Inc., owner of the proposed Babkirk Secure Landfill in Northeastern British Columbia (see: Competition Bureau Challenges BC Landfill Merger).
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
