COMPltlTION 1RIBUNAL TRllUNAl DE I.A CONtURRENCI P f I Cl-Ci8/02.. ~ l 1 E lDEC 3 1 1998 ~ ~ i 0 RfGl~TRAR - R(GISTRAIRI f 1 THE COMPEmtoN TRmUNAL • ·-;~~WA, ONT. itT1_7' : tN THE. MATTER. OF THE COMPETITION ACT. R.S. 1985, c.C-34 as art:tetlded, and the Competition Tribunal Rules. SOR/94~29~. as a.mended (the "R.u1es'};
AND 1N T~E MATTER. OF an inquiry pursuant to subsection 10(1)(b) of the Competition Act relating to the proposed
acquisition ~fICG Propane Inc. by Superior Propane lnc.j <
AND IN ntE MATTER OF an Application by the Director of tnvestigatiah and R.esearch for an interim order pursuant to section 100 of the Competttio1'1 Act AFFIDA vtT OF ANDREW STEPHENS ll~·~IClPATION OF APPLICATION FOR INTER1M MttEF BEFORE THE COMPETittON.IB.tBJm~ J, ANOR.EW STEPHENS.":ofCalgary. Albert~ MAKE OAm ANO SAY AS FOLLOWS: 0 1. 1 am Vice·l>resident. Supply Logistics and ltefitting of Petro-Canada. I am a chemical engineer and hav~ been employed by Petro-Canada in a variety of positions since 1979. ' In the fall of 1997, I was ~signed a special project to assist with Petro-Canada's plans to dispose oftCG Propane Inc. ("lCG4J. which is a wholly-owned subsidiary of Petro-Canada. As such, I have personal knowledge of the matters deposed to in this Affidavit, except whete stated to be on inf'otmation and belief. and in all such cases. I believe the inf"onnation to be true.
Decision to dispose of tct; i 0 2. Petro-Carta4a acquired ICG in 1990. In 1996 alter a strategic review, Petro~Canada determined that ICG was uot a core business and made a decision to dispose of it. Petro .. Canada considered a ntttttber of altc!rna.tives and concluded that a public offering by way of art i11come fund trust ("IFT") would be the lnost advantageous course. and in late 1996, Petro-Canada began work to prepare ICG for dispositiot1 by way of an IFT.
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2 3. After Petro.1.Canada <tttnounced its intention to dispose ofICG, a number of parties. induding Superior Propane Inc. ('"Superior'') expressed interest in purchasing ICG. lnfotmation · concerning the identity of these third parties has been provided to staff of the Competition l3ureau (the "Bureau").
4. Petro.ca~ however. determined that its best a1temative was to proceed with a public offering and began\~ to complete a disposition by way of an tFT. In otder to facilitate the disposition, steps were taktm to ensure that ICG would be able to operate on its o~ independent from Petro-Canada. This ~ncluded ensuring that ICG had its own separate board of directors and management team and having its offices move out of the Petro-Canada building in Calgary, Alberta
5. In June, 1~98, Petro.Canada was in the final stages of its ITT. Superior again approached Petro-Canada and expressed a serious interest in acquiring ICG. Superior's proposal Q was more attractive in ec":'nomic tenns to Petro-Canada than the tFT. Superior believed that the transaction would not ultitnateJy be found to result in a substantial lessening of competition. but stated it was also willing: to take on the risks relating to any possible proceedings under the Competitio'f Act. At the time that Superior approached Petro-Canada, orders had been received for approximately 55°/o of the· !FT units9 whereas PetnH;anada wished to dispose of all of its interest in ICG. Fot these reasons •. Petro-Canada entered into serious discussions with Superior for the sale of all ofits interests in ICG.
Dealings with the Compjtitton Bureau 0 6. I am advised by our legal counsel. '.Barry Zatmanowitz of Fraser Milner, that on June 19. 1998. he and counsel fbr Superior spoke by telephone with senior officials of the Bureau. and without disclosina the~ of the parties they represented. sought the comments of the Bureau on a share acquisition structuted such that a vendor could avoid the risk of ultimately being required in proceedings under the: Competition Act (the "Act'') to take back the shares. The Bureau
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.. 3 representatives indicated that something simi tar had been done before. but prior to making any further commitment, spetific details about the transaction. including the identity of the parttes,, would be required. Counsel advised the Bureau representatives that they would seek instructions. but did indicate to thetti thcit it was a transaction that the Bureau would likely examine very closely because the puttbaset was ;a competitor of the intended acquiree, and the acquisition would result
in the purchaser having a significant percentage of sales of the business in Canada.
7. I am advised by Barry Zahnanowitz that on June 22, 1998. he and Mr. Barutciski of Davies Ward & Beck. competition law counsel to Superior, spoke on the telephone with Mr. Bocking arui Mr. Sullivan pf the Bureau~ and advised them that the transaction was one in which Superior was ptopasing to '1.cquire all of the shares ofICG. During that conversation. Mr. Baru.tciski explained th.at Superior wished to gil'e the Bureau full co-operation and the time that was reasonably necessary to review the tr~saction. but Petro.Canada. required assurances very quickly that it could set1 its interest in lCG to Superior arid. if ultimately an application by the Director to the Q Competition Tribunal (the:"Tribunal") under section 92 oftbe Act was successful, Petro-Canada would not be obliged to tatd: back the shares. Mr. :Barutciski and :Mr. Zalrnan.owitz exp1mned to Mr.
Bocking that Superior had ~ached Petro-Canada shortly befote the IPT was to be completed and. due to the market conditions. Petro~Canada had to make a decision quickly whether to abandon the ITT and pursue an agreemdn.t with Superior. Mr. Bocking indicated that such an arrangement was something the Bureau wobld consider and suggested that one approach may be to request an advisory opinion with respect to the intetim aspects of the transaction, and that the Bureau and its legal counsel would considbr it, but their concern would be to ensure that any interim arrangements were satisfactory to presmie the Bureau's rights to fully review the substantive tnnsaclion and seek an appropriate remedy. 0 8. A meeting ~ith Bureau representatives was held on Friday. June 26, 1998. l am advised by Barry Zalman~itz and Alf Peneytad, Gerieral Co\Ulsel of Petro-Canada. both of whom attended the June 26. 1998;meeting with Bureau representatives, that Mr. Pecman., on behalf of the Bureau. indicated that he was not in a position at that time to advise whether the Bureau would be
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inclined to accommodate Petro-Canada, but indicated that his initial reaction was neither negative nor positive and wanted to ~onsider it over the weekend and discuss it with Mt. Boclci.ng and others on Monday morning and ~ould get back to the parties at that time.
9. I am info~d by our legal counsel, Barry Zaltnanowitz., that on June 29, 1998. he had some further discussions with representatives of the Bureau pursuant to which those representatives indicated tlutt they were generally comfortable Vllith what the parties were proposing. but that there were two mas in which they requested some further infont1ation. The first was whether Petro-Canada would be prepared to agree to continue to provide information after closing in the event of proceedings before the Tribunal. and the second was the identity of other potential purchasers of ICG. Petro~Canada advised that it would be prepared to enter into any arrangement. even after a closing~ to p~it it to be subject to discovery in the event that there were proceedings before the Tribunal. Petro-Canada also agreed to pro\lide the Bureau with information concerning other potential purchasers .. 0
10. On the motning of Mottday, June 29, 1998. Petro-Canada. based in part 011 the apparent willingness of tlie Bureau to be flexible and accommodate its concerns, decided to withdraw the IF!. A1thou$h a conference call with Bureau representatives was scheduled fot 2:00 p.m. that afternoon. it was delayed at the Competition Bureau ts request until 3: 15 p. m.
1t . Jam advis~ by Barry Zalmanowitz that at approximately 3:15 p.m. on June 29, t 998. a telephone conference call was held with Bureau representatives, and during the converaation, Petro.Canada advised that it had already made the decision to withdraw the public offering of!CG. Francine Matte, on behalfo f the Bureau, advised that the Bureau had considered what the parties 0 were proposing and had miny concerns because of the high market share that Superior would have after the proposed transaction and that the Director would not be prepared to provide a fawurable advisory opinion concerning an interim arrangement before completing a review of the proposed transaction.
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5 12. The foregotng paragraphs are not intended as criticism of the Bureau or any of its representatives, but are prc;,vided only by way of background.
13. The parties completed a Share Purchase Agreement and notified the Director pursuant to Part IX of the Act. Attathed as Exhibit "A" to this Affidavit is a letter dated July 21, 1998 from the Pre-Notification Unit dfthe Comt'etition Bureau confirming that the filing has been verified as { being t:ornplete. and that the waiting period would end on Juty 27. 1998.
14. The parties· initially proposed to complete and close the transaction on October 30. 1998 but agreed to postpone the closing because of the Bureau's advice that it would issue its preliminary views on the proposed transaction on October 30, 1998 and its final views on November 30. 1998. The parties alsd undertook in August. 1998 to give the Bureau 3 weeks' notice of the intended closing date which was to be by December 15. 1998 as provided in the Share Purchase Q Agreement. On Novembet 16, 1998, the parties advised the 13ureau that they intended to close the transaction on December 1. 1998.
15. In addition 'to the material provided in the Part IX filing. the parties on a voluntary basis also provided information that the Bureau requested for the purposes of reviewing the competitive effects of the proposed transaction tmd com.plied with all additional foltow-up requests in a timely manner.
16. On SeptemHer 14, 1998. the Director applied for and obtained an Order under section 11 of the Act requiring ICG and Superior to provide a great volume of information and records 0 within 21 days of service. The Order also required Mr. Wiswell. the President ofICG, to appear before a presiding officer on October 19, t 998 to be examined on matters relevant to the inquiry.
17. On October 8 and 9. 1998. Superior and ICG delivered a large volume of materials to the Bureau in answer to the section 11 order, and duriiig the week of October 19. 1998, Mr.
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6 Wiswell attended to be exabtined by the Director's representatives and, on a voluntary basist I also attended to be examined by such representatives.
18. In a memot4indum dated October 28. 1998 to the Bureau, Petro·Canada requested that the Director at the earHest cipportunity explore with the patties an arrangement that would pettttit the transaction to close into a ieasonable hold separate arrangement. Attached as Exhibit .. B" is a true copy of the October 28. 1998 memorandum. The Director has stated he is not prepared to consent to such an anangem ent.
EJ.Tect of a bold separpte !rrangerrtf?nt on. the Tribunal's ability to &t•nt efTecti•e remedy 19. I am aware ·of the Affidavit of Mark Schweitzer filed on behalf of Superior and I believe that the tenns of the hold separate arrangement. that Superior has indicated it would be prepared to enter into, would maintain ICG as a separate and viable competitive business pending 0 the detennination of any a~lica.tion by the :Director to the Tribunal under section 92 of the Act, aru:t would not substantially imhair the Tribunal• s ability to grant an effective remedy at the conclusion of such proceeding in the eVettt that the Tribunal ultimately found. that a remedial order was required.
20. Prom the dutset, Superior and Petro·Canada had indicated a. willingness to the Director's represen:tati\res tb enter into arrangements with the Director that would permit the sale of ICG to Superior under ~asonabte hold separate arrangements which would accomplish the following:
0 (a) Pertnit a full review. by the Director. of the proposed merger; (b) Prderve ICG as a separate and viable competiti\re entity pending completion by the Direttor of a review under the merger provisions of the Act; .and
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7 (c) Perrriit Petro~Canada to dispose of its shates in !CG without the material risk that the Dit~tot tVOttld seek a remedy from the Tribunal requiring Petto-Canada to take back the shares and retum the purchase price ("Rescission of the Agreement').
Benefits of order permitdna the transaction to close Into a b~.ld.s.e.narate arrangement 21. Petro-Canada is obliged during the ti.me period between the execution and the closmg of the Share Purchase A~ent to maintain ICG as a viabte business. Although Petro-Canada and !CG have made diligent eftorts to do this, the risks of the value oflCG deteriorating increase with the length of time that !Cd customers, suppliers and employees a.re subject to uncertainty.
22. Supenor and Petro-Canada believe that it is in the best interests of their respective shareholders to pursue thi~ transaction. I also believe that the transaction will not result in a substantial lessening of cdmpetition. and that it will generate great efficiencies in the propane 0 distribution and supply b~iness and in that regard. I agree with the statements of Superior. There is a public interest in the rrlbunat granting an order pennitting the transaction to close under the hold
separate arrangement proposed by Superior because this preserves the opl'<Jrtunity for this transaction to be ultimately completed.
23. Although Shperior and ICG have taken steps to ensure that ICG is preserved as a viable competitor in the int~ an order incorporating reasonable hold separate mangements would give the Director the oppodunity to ensw-e that ICG is sustained as a ttiable competitor pending the outcome of any applicatiorl to the Tribunal. In that regard, Petro-Canada and Superior established strict rules and procedures~ ensure that competitively sensitive information was not exchanged and 0 commercially sensitive inibtmation wu restricted and not used for any anti-competitive purpose during the time period bet.1r.reen execution and closing of the Share Purchase Agreement. To my knowledge; these ru.tes atid procedures have been followed and similar pro·v"isions could be incorporated into an order pennitting the Share Purchase Agreement to close under a hold separate atta.11gement.
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8 24. The followiPg circumstances jU$tify the Tribunal issuing an order pennitting the transaction to close under teasonable hold separa1e attangements:
(a) :Petm-Canada intends to dispose of tCG in any event; (b) Sup~rior has indicated a willingness to consent to an order with reasonable hold sep.araie provisions; and
(t) Iftl* Tribunal ultimately finds the acquisition requires a remedial order, such as an order requiring Superior to dispose of all or part of ICG to a third party. in order to r~medy atty substantial lessening of competition. that would have substantia11y the same effect as an order prohibiting the parties from completing the transaction.because Petro-Canada will dispose oflCG in any event. 0 As such, the transaction closing under a hold separate arran1ement would not substantially impair the ability of the Tribunal to remedy the effect of the proposed acquisition on competition.
25. I make this:Affidavit in opposition to an application brought by the Director under section 100 of the Competttiott Act.
SWORN before me at the City of Toronto ) in the Province of Ontario ) this rd day ofD ember •. 1998. ) 0 !An~~ Slv-~ OZ/Ol 'd EZS·l Z6Sv-E99-91?+