The frenetic M&A action in Canada's energy sector shows no signs of cooling off, as demonstrated by the $15 billion offer that China National Offshore Oil Corporation (CNOOC) made on July 23 for Calgary-based Nexen Inc., a major player in Alberta's oil sands. What may be cooling off is the Canadian government's enthusiasm for foreign ownership in the sector.
Ottawa announced on October 11 that it was extending its review of the Nexen takeover for 30 days. On October 19 the government blocked a similar dealthe planned $5.2 billion takeover by Malaysian stateowned Petroliam Nasional Berhad (Petronas) of Progress Energy Resources Corp., another Calgary-based Canadian energy power [Canadian Big Deals, September]. The Petronas/Progress rejection shook the Canadian oil industry, and all eyes immediately turned to the CNOOC/Nexen deal, with one obvious question: Could it also fail to win Ottawa's approval?
When CNOOC announced its all-cash offer of $27.50 per Nexen share, the bid represented a premium of 61 percent over Nexen's share price on the New York Stock Exchange at the close of the previous trading day. In all, the offer includes $15.1 billion in cash, as well as assumption of $4.3 billion in Nexen's debt, which will remain outstanding. Nexen shareholders approved the CNOOC offer on September 20.
CNOOC's bid for Nexen is an encore to its $2 billion acquisition of Opti Canada Inc. in 2011. Chinese energy companies have been aggressive buyers in the Canadian oil patch. If CNOOC's bid for Nexen is approved, almost $50 billion will have been spent by Chinese firms acquiring Canadian reserves and firms, according to Bloomberg. That compares to just $3.5 billion that Chinese acquirors have spent on U.S. energy assets.
As for the Petronas deal, the Malaysian company has said that it will appeal the government's decision to block its acquisition of Progress. Government officials said that they needed more time to review the transaction, but Petronas declined to agree to an extension. That appears to have left Canadian officials with a choicethey could bless the deal, but without having completed their analysis of it, or they could block it. Ottawa chose the latter.
For acquiror China National Offshore Oil Corporation (Beijing)
M&A: William Braithwaite, John Ciardullo, Christopher Nixon, and associates Mike Devereux, Christos Gazeas, Benjamin Hudy, J.R. Laffin, and Warren Ng. Energy: Bradley Grant and associates Cameron Anderson and Kurtis Reed. Tax: Ron Durand and associates John O'Connor and David Weekes. Competition: associate Michael Kilby. Pensions: Andrea Boctor and associate Luc Vaillancourt. Employment: Gary Clarke and associates Kelly O'Ferrall and Cheryl Rea. Environmental: Larry Cobb and Greg Plater. Debt: Lewis Smith. Real estate: Mike Dyck. Competition: Susan Hutton and associate Lawson Hunter. (All are in Toronto except for Nixon, Hudy, Grant, Anderson, Reed, Weekes, Clarke, Rea, Plater, and Dyck, who are in Calgary; and Hutton and Hunter, who are in Ottawa.)
Davis Polk & Wardwell:
Corporate: George Bason, Kirtee Kapoor, Leonard Kreynin, Howard Zhang, and associates James Elworth and Brian Snyder. Antitrust: Ronan Harty. CFIUS review: John Reynolds III. Hong Kong law: Paul Chow and Antony Dapiran. (All are in New York, except for Zhang, who is in Beijing; Kapoor, Chow, and Dapiran, who are in Hong Kong; and Reynolds, who is in Washington, D.C.) The firm advised CNOOC on a $2 billion debt issue offering on the Hong Kong Stock Exchange in April.
Herbert Smith Freehills:
Competition: James Quinney. Energy: Simon Tysoe. (They are in London.) The firm previously advised CNOOC on its joint $2.9 billion acquisition of stakes in three Ugandan oil exploration projects.
For target Nexen Inc. (Calgary)
Senior vice president and general counsel Alan O'Brien, vice president and chief counsel corporate/marketing Richard Beingessner, senior counselcorporate James Cummings, legal counsel Joseph Cumming, and senior regulatory counsel Shannon Young.
Blake, Cassels & Graydon:
M&A: Jeff Baker, Ross Bentley, John Eamon, Shlomi Feiner, Pat Finnerty, Michael Gans, and associates Olga Kary, Chris Prokop, Nathan Robb, and Kevin Rusli. Competition and Investment Canada: Jason Gudofsky, Deborah Salzberger, and associate Lucian Vital. Pension and benefits: Caroline Helbronner and Sean Maxwell. Tax: Robert Kopstein. Employment: Connie Reeve and Brian Thiessen. Litigation: Melanie Gaston and David Tupper. (All are in Calgary, except for Feiner, Gans, Rusli, Gudofsky, Salzberger, Vital, Helbronner, and Reeve, who are in Toronto.) The firm has represented Nexen since the 1990s.
Paul, Weiss, Rifkind, Wharton & Garrison:
Corporate: Jeanette Chan, Andrew Foley, and Edwin Maynard. International trade: counsel Richard Elliott. (Chan is in Hong Kong; Foley and Maynard are in Toronto and New York; and Elliott is in Washington, D.C.) The firm has been advising Nexen on U.S. legal matters for more than 25 years.
For Nexen board of directors
Burnet, Duckworth & Palmer:
Grant Zawalsky. (He is in Calgary.)
Richard A. Shaw Professional Corporation:
Richard Shaw. (He is in Calgary.)
Covington & Burling:
Government affairs: senior counsel Martin Gold and special counsel Muftiah McCartin. Financial services: Mark Plotkin. Energy: Gerald Waldron. (They are in Washington, D.C.)
Competition: Mark Jones and Jacqui Williams. (They are in London.) The firm previously advised Nexen in Canada on the $975 million sale of heavy oil assets to Northern Blizzard Resources.
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A long-running saga finally culminated on August 10, when a consortium of some of Canada's largest financial institutions completed their $3.8 billion acquisition of TMX Group Limited, bringing almost all Canadian stock markets under one firm.
By acquiring TMX, Maple Group Acquisition Corp. took ownership of the Toronto Stock Exchange, as well as a smaller exchange belonging to Alpha Trading Systems Limited Partnership, plus Canada's largest clearinghouse, CDS Clearing and Depository Services Inc. Maple now controls more than 90 percent of Canadian market trading.
Talks to clear the way for the deal continued for well over a year. TMX initially agreed to merge with London Stock Exchange plc. The Maple consortium was formed in response by some of Canada's financial heavy hitters, out of concern that the TMX/LSE deal would diminish Canada's trading markets. The Maple group included 13 banks, investment firms, and pension funds, including CIBC World Markets Inc., TD Securities Inc., Ontario Teachers' Pension Plan, and Caisse de depot et placement du Quebec.
Maple made a hostile bid for TMX, and with the clout of the blue-chip financial sector behind it, TMX shareholders rejected the LSE offer in June 2011. TMX afterward opted to support Maple's bid.
For acquiror Maple Group Acquisition Corp. (Toronto)
Senior vice presidentgroup head of legal and business affairs Sharon Pel, director of regulatory affairs Deanna Dobrowsky, and Nicole Rosenberg.
Davies Ward Phillips & Vineberg:
M&A/Securities: Steven Harris, Peter Hong, Vincent Mercier, Philippe Rousseau, and associates Matthew Hawkins and Matthew Himel. Competition: Anita Banicevic and John Bodrug. Tax: Christopher Anderson and Elie Roth. Financial services: Derek Vesey. (They are in Toronto.)
Corporate finance/M&A: Garth Girvan and Graham Gow. Business law: Matthew Cumming, Ian Michael, Sean Sadler, and associates Leslie Milroy and Paulina Tam. Competition: Oliver Borgers and Donald Houston. Financial services: Richard Higa. Tax: Mario Abriou, Douglas Cannon, and Andrew Silverman. Litigation: Erica Baron, Eric Block, and Paul Steep. Intellectual property: counsel Ian Bies. Labor and employment: associate Daniel Pugen. (All are in Toronto.) McCarthy Tétrault says it was retained by certain shareholders of Maple for its expertise in M&A deals.
Blake, Cassels & Graydon:
M&A: Navin Joneja. Competition: Calvin Goldman, Deborah Salzberger, and associate David Rosner. (They are in Toronto.)
Paul, Weiss, Rifkind, Wharton & Garrison:
Corporate: Matthew Abbott, Mark Bergman, Adam Givertz, and Edwin Maynard. Tax: David Sicular. (Abbott, Maynard, and Sicular are in New York; Bergman is in London; and Givertz is in Toronto.) Paul Weiss was hired by Maple on the recommendation of Canadian counsel.
Weil, Gotshal & Manges:
Corporate: Michael Aiello, Peter King, and Ellen Odoner. Tax: Helyn Goldstein. (All are in New York, except for King, who is in London.)
For the lending syndicate of National Bank of Canada, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, and Toronto Dominion Bank
Fasken Martineau DuMoulin:
Corporate/M&A: Jonathan Levin. Banking and finance: John Elias and associate Dev Singh. Tax: William Bies. (They are in Toronto.)
For Canadian Pension Plan Investment Board (Toronto)
Borden Ladner Gervais:
M&A/Securities: Paul Findlay and David Surat. Business law: Alfred Page. (They are in Toronto.)
For target TMX Group Limited (Toronto)
M&A/Securities: Richard Balfour, Andrew Beck, Aaron Emes, Sharon Geraghty, and associates Morgan Crockett, Catherine De Giusti, Dean Kotwal, Robbie Liebel, and James Miller. Antitrust: Jay Holsten, Linda Plumpton, Omar Wakil, and associate Justin Necpal. Tax: James Guadiana, Kathryn Moore, James Welkoff, and associates Catrina Card and David Mattingly. Lending: Tom Zverina. (All are in Toronto, except for Beck, Guadiana, and Mattingly, who are in New York.) Torys has represented TMX Group since 1985.
For target Alpha Trading Systems Limited Partnership (Toronto)
Stacey Hosiak and Randee Pavalow.
Corporate/M&A/Securities: Perry Dellelce, Troy Pocaluyko, and Rob Wortzman. Corporate governance: Mark Wilson. (They are in Toronto.)
Cassels Brock & Blackwell:
Competition: Chris Hersh. (He is in Toronto.)
For target CDS Clearing and Depository Services Inc. (Toronto)
Jamie Anderson and Tony Hoffman.
Borden Ladner Gervais:
Corporate/Securities/M&A: Jeff Barnes, Robert Hutchinson, and associate Mark Lau. (They are in Toronto.)
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ING Bank of Canada
A long-running TV advertising campaign for ING Bank of Canada features a ubiquitous pitchman who urges viewers to "save your money." However, The Bank of Nova Scotia decided to spend some when it announced on August 29 that it would pay $3.1 billion to acquire the Canadian subsidiary of ING Groep NV, the Dutch-based financial multinational. Scotiabank will fund the acquisition with $1.9 billion in cash and a stock issue of 29 million shares at $52 each. The deal is expected to close in December, subject to regulatory approvals.
ING Bank of Canada (better known to consumers as ING Direct) occupies a unique niche on the personal finance landscape. The bank has no physical branches, customers are not required to have minimum balances, and they aren't charged service fees. ING has also generally paid higher interest on savings and offered cheaper mortgage rates.
All of thatplus those folksy and familiar TV adshas helped ING carve out a market with 1.8 million customers since arriving in Canada in 1997. ING boasts $30 billion in deposits and a robust mortgage and loan portfolio worth another $30 billion.
Scotiabank said at the time of the deal that it is committed to providing customers with the same experience that attracted them to ING in the first place, although the brand is expected to be absorbed into the Scotiabank family within 18 months.
The deal is the second major domestic financial acquisition for Scotiabank in two years. In late 2010 Scotiabank laid out $2.3 billion to acquire fund manager DundeeWealth Inc.
For ING Groep, the deal represents a further diminution of its Canadian footprint. It sold its Canadian insurance arm to institutional investors in 2009 for $2.2 billion. ING Canada, which renamed itself Intact Financial Corp., bought AXA Canada for $2.6 billion.
For acquiror The Bank of Nova Scotia (Toronto)
Corporate: Michael Siltala, Stefan Stauder, Cornell Wright, and associates Harry Cherniak and Adrienne DiPaolo. Tax: Corrado Cardarelli and Andrew Wong. Intellectual property: Edward Fan, Conor McCourt, and associate Yolande Dufresne. Competition: Jay Holsten and Omar Wakil. Litigation: Andrew Gray. Employment: Mitch Frazer and associates Janelle Bowman and Jessica Bullock. Banking: Blair Keefe. Regulatory: Christine Vogelesang and associate Dawn Scott. (All are in Toronto, except for Stauder, who is in New York.) Torys has represented the Bank of Nova Scotia since 1985.
For seller ING Groep NV (Amsterdam)
Sullivan & Cromwell:
M&A: Brian Hamilton and Mark Menting. Intellectual property: Nader Mousavi. Tax: Ronald Creamer. Executive compensation: Matthew Friestedt. (They are in New York.)
M&A: Mark Duquette, Andrew Fleming, Peter Wiazowski, and associates Christine Dubé, Laurent Levac, David Millette, Marie-Noel St-Hilaire, and Michael Wahl. Tax: Derek Chiasson. Executive compensation and benefits: Anne Gallop and Martin Rochette. Governance: Ruth Wahl. Competition: Kevin Ackhurst. Intellectual property: George Locke. (All are in Toronto, except for Duquette, Wiazowski, and Chiasson, who are in Montreal.) The sale of ING Direct Canada to Scotiabank is the first transaction Norton Rose has handled for ING in Canada. However, the firm has previously done work for ING Groep in Europe.
For the ING board of directors
Davies Ward Phillips Vineberg:
Corporate: Peter Hong and Jay Swartz. (They are in Toronto.)
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Montreal-based technology services company CGI Group Inc. completed its $2.7 billion cash acquisition of British IT consultancy and services firm Logica plc on August 20, opening a European gateway for expansion. The deal makes CGI one of the world's largest IT services vendors, with revenue of more than $10 billion annually.
First announced in May, the deal was unusual because Logica was actually the larger of the two firms. Logica shareholders received $1.68 per share, about a 60 percent premium over the stock's predeal trading price and about 50 percent better than the stock's previous one-month average. CGI also assumed almost $500 million in Logica debt. Logica shareholders voted 99.5 percent in favor of the deal. The new company has 72,000 employees in 43 countries.
In the short term, the lack of a global market presence by either firm is viewed by some analysts as a challenge for the merged entity. But a big plus for CGI Group is that while the bulk of its business was previously based in North America, Logica comes with a major footprint in Europe, as well as smaller portfolios of business in Asia, Australia, and India.
Logica's recent fortunes have been buffeted by Europe's economic woes, but CGI Group's leadership sees public and private sector IT investment as a good bet going forward, regardless of economic turmoil. CGI's last major acquisition was in 2010, when it paid $1 billion for Stanley Associates.
For acquiror CGI Group Inc. (Montreal)
Fasken Martineau DuMoulin:
Securities/M&A: Michel Boislard, Robert Paré, and associates Joëlle El-Féghali, Jean Michel Lapierre, Rebecca McLeod, and Jimmy Triassi. Corporate commercial: Richard Cliff and associates Anne Cobbett and Michael Kashis. Banking: Marc Novello, Angela Onesi, and associates Alexandre Gagnon, Martin Racicot, Francis Trifiro, and Svetlana Samochkine. Regulatory: Huy Do. (All are in Montreal, except for Cliff and Kashis, who are in London, and Cobbett and Do, who are in Toronto.)
Business law: Robert Brant and associates Sarah Landry Maltais and Alexander Strong. CGI Group is a longtime client of the firm and its London office.
Employee benefits: Monique Fry. (She is in London.)
Sullivan & Cromwell:
Corporate/M&A: Timothy Emmerson and Ben Perry. Competition: Juan Rodriquez. Tax: Michael McGowan. Finance: Presley Warner. (They are in London.) The firm was recommended to CGI Group by the company's financial adviser, Goldman Sachs.
For target Logica plc (London)
Freshfields Bruckhaus Deringer:
Corporate: Andrew Hutchings, David Sonter, Jan Willem van der Staay, and senior associate Helen Archbold. Employment: Simon Evans and associates Holly Insley and Jenna Poon. U.S. securities: Doug Smith. Competition: John Davies and associates Francesco Leonetti, Alexandra Meagher, and Mari Scimemi. Banking: Simon Johnson. Tax: Sarah Falk and Eelco van der Stock. (All are in London, except for van der Staay and van der Stock, who are in Amsterdam).