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March 23, 2009 4:53 PM

Blakes, MacLeod Dixon on $15.5 Billion Suncor / Petro-Canada Deal

Posted by Julie Triedman

In the second-largest deal in the oil and gas industry since January 2007, Canada's Petro-Canada agreed on Monday to be acquired by Suncor Energy Inc. for $15.5 billion.

Under the terms of the all-stock deal, Petro-Canada's shareholders will receive 1.28 shares of the merged company, to be known as Suncor. Suncor shareholders will receive one-to-one shares of the new company and will hold approximately 60 percent of the merged company.

Suncor CEO Rick George will remain as CEO of the new company; so, too, will eight of 12 members of Suncor’s board, including its chair.

The deal was legally structured to abide by a provision in Canadian law that prohibits anyone from owning more than 20 percent of Petro-Canada stock, according to Suncor's George. But it was still unclear how Suncor was able to do so, since the 1991 law--the Petro-Canada Public Participation Act--was intended to bar takeovers, Dealbook noted. George said in a conference call Monday that the law, which was enacted when the Canadian government privatized the national oil company in the 1970s, has outlived its usefulness.

Suncor has tapped a 28-lawyer team at Blake, Cassels & Graydon as main outside counsel on the deal, working with an in-house team. 

Blakes partner and chair Brock Gibson is the lead outside lawyer on the matter. The team includes M&A partners Chad Schneider, David Jackson, Shlomi Feiner, Eric Moncik, Geoff Belsher, Michael Gans, and David Glennie; competition partners Cal Goldman, Brian Facey, and Jason Gudofsky; banking partners Daniel Fournier and Kevin Fougere; tax partners Edward Rowe and Edmund Gill; employment partners Kathy Bush and Brian Thiessen; energy partners Craig Spurn and Chris Christopher; litigation partners Web Macdonald and David Tupper; and associates Jeffrey Bakker, Lindsay Bunt, Gavin Matthews, Janan Paskaran, and Timothy Theroux. The firm relied on partner J.A. Prestage and scholar-in-residence Peter Hogg for advice related to the Petro-Canada act.

Suncor’s in-house team included general counsel Terry Hopwood and legal affairs director-corporate Arlene Strom.

The company also turned to Shearman & Sterling to handle U.S. aspects of the deal.

Petro-Canada called on an 11-lawyer team from Calgary-based MacLeod Dixon. The team was led by Robert Engbloom and included Justin Ferrara, Neville Jugnauth, and Jamie Gagner on M&A; Harold Jacques and Dion Legge on tax; Michael Wylie on banking; John Carleton and Rujuta Patel on competition;  Alan Harvie on environmental; and Roger Smith on employment/HR matters.

Petro-Canada is being advised by Torys on U.S. aspects of the deal and on Petro-Canada Public Participation Act matters; the lead Torys partner on the work is Peter Jewett. Petro-Canada general counsel Scott Miller and associate general counsel Hugh Hooker are handling matters in-house.

Suncor said the merger should help trim $300 million in costs and help the two companies reduce their reliance on expensive projects extracting crude from northern Alberta's oil sands. Those projects have stalled since oil prices fell by more than $100 a barrel over the past year.

Despite the positive reaction by investors to the deal, regulatory hurdles remain. The deal will merge the two largest oil-sands players and create Canada's largest energy company. Canada's Competition Bureau has 30 days to evaluate whether the merger creates undue concentration in production, refining, and marketing sides of the business. The Canadian government will also be examining whether the deal conforms with the Petro-Canada Public Participation Act.

The deal carries a $300 million breakup fee should either party cause the deal to fail. But if either company fails to obtain regulatory approval, the breakup fee will not apply, according to the Financial Post.

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