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. They are used as inputs for petrochemical plants, cooking and heating, and are blended into vehicle fuel.
The Keyera-Plains deal would reduce the number of major integrated service providers at the hub from three to two, "limiting producers' choice among providers for processing services and weakening competitive discipline in contract negotiations," the bureau said.
The bureau added the merged company would have greater ability to "increase prices, impose less favorable contract terms, reduce incentives to expand capacity, and further entrench control over critical infrastructure."
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 to the application." It promised a more detailed statement later Tuesday.
Keyera said the new regulatory hurdle doesn't prevent the company from closing the transaction. A spokesperson for Plains didn't respond to a request for comment.
Shares in Keyera were down in the Toronto stock market about 3.8% in late Tuesday morning trade on the news. Plains' stock price fell 1.2% in trading on Nasdaq.
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 François-Philippe Champagne ordered government departments to remove policies that impede competition.
The bureau has filed an application to the Competition Tribunal for an order "to preserve competition in the processing of natural gas liquids at the Fort Saskatchewan hub." The tribunal is similar to a court, and hears applications made by the antitrust watchdog.
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 in Alberta, Saskatchewan, Manitoba and Ontario. 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.
When the deal was unveiled, Keyera 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.
Tuesday's move follows the Competition Bureau's filing last month for a court order, to allow the agency to gather records in its probe of the Keyera-Plains deal. Despite that move analysts at Raymond James and Bank of Nova Scotia were confident the deal would close in May.
In March, Keyera and Plains said that the planned deal was taking longer than anticipated.
Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
05-05-26 1142ET
