Calgary-based Keyera first announced a deal to acquire assets from Plains All American in June last year.Supplied
Calgary-based Keyera Corp. KEY-T announced Tuesday it had closed its $5.15-billion acquisition of Plains All American LP’s PAA-Q Canadian natural gas liquids business, even as the federal Competition Bureau challenges the deal.
The acquisition will significantly expand Keyera’s liquids infrastructure business by creating an integrated natural gas liquids (NGL) corridor that stretches from Western to Central Canada. Houston-based Plains’ assets in the deal include extraction, storage, pipelines, and rail and truck terminals in Alberta, Saskatchewan, Manitoba and Ontario.
But the bureau argues that the deal would significantly reduce competition at Canada’s most important natural gas liquids hub – in Fort Saskatchewan, Alta. – thereby harming domestic energy producers and increasing supply-chain costs.
The watchdog last week filed an application with the Competition Tribunal to challenge the acquisition. If the tribunal ends up siding with the bureau, Keyera could be forced to unwind the transaction or divest certain parts of the business.
The Competition Bureau said in an e-mail it is aware of Keyera’s announcement and stands behind the findings of its investigation. It noted that the Competition Tribunal has the power to order remedies even after a merger has closed to preserve the level of competition that existed prior to a deal.
But Dean Setoguchi, Keyera’s chief executive, told The Globe and Mail in an interview ahead of the announcement that the company would not have closed the deal if it didn’t have a high degree of conviction in its case.
While he declined to elaborate on why he was so confident, Mr. Setoguchi said Keyera has “a much different view of the world” than the bureau.
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Mr. Setoguchi believes that the general sentiment in the industry is that the Plains acquisition would be a positive development for the sector, and said most players were likely shocked at the outcome of the bureau’s investigation.
The bureau found that the transaction would harm competition by eliminating Plains as a close competitor to Keyera, significantly increasing market concentration in natural gas liquids processing.
As a result, Keyera would have a greater ability to increase prices, impose less favourable contract terms, reduce incentives to expand capacity and further entrench control over critical infrastructure, the bureau said in its decision.
Keyera first announced its plan to buy the Plains’ assets on June 17 last year.
Mr. Setoguchi told investors at the time that the deal was a defining moment for the company and a rare opportunity to “add scale, unlock value and extend our platform for decades to come.” It would also bring key natural gas liquids infrastructure under Canadian ownership, he said.
The Competition Bureau opened a review on June 19 into whether the deal would likely result “in a substantial lessening or prevention of competition in the Canadian oil and gas industry.”
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On March 31 this year, Keyera pushed back the expected closing date for the acquisition, citing ongoing regulatory reviews. Originally targeted for completion around the end of the first quarter of 2026, the company said it instead expected to close in May.
Mr. Setoguchi told The Globe that the continuing back and forth and associated delays have created “uncertainty for everyone,” including the investment community and workers at both companies.
Keyera was also under a time crunch to get the deal past the finish line. It raised roughly $1.8-billion in subscription receipts to fund the acquisition, which are set to expire on June 30. If it hadn’t completed the Plains transaction by then, Keyera would have had to pay the money back.
With the deal now closed, Mr. Setoguchi said he’s excited to explore Keyera’s next moves.
Plains’ Canadian assets were something of a cash cow for the U.S. company, he said. While they were well-maintained, the company didn’t invest much into them; rather, Plains took the money generated by the assets and invested it into its U.S. crude oil operations.
Plains CEO Willie Chiang said in a statement that the deal completes his company’s transformation to a pure play, crude oil midstream company that will be less vulnerable to commodity price volatility.
Plains’ remaining crude footprint is “highly competitive with integrated assets spanning from Canada to the U.S. Gulf Coast,” he said.
For Keyera, closing the deal means it will have a major corridor to supply NGLs, Mr. Setoguchi said, which in turn will boost exports off Canada’s Pacific coast to help diversify markets.
“We are a Canadian company. Our business is here in Canada. So we’re focused on growing the industry and making it better,” Mr. Setoguchi said.
“When you think about the bigger picture of where we are in the world, and the need for reliability of energy supply and energy security, it’s good for Canada as well.”
Under Competition Tribunal rules, Keyera has 45 days from the date of the bureau’s May 5 filing to respond. The bureau then has 14 days to file a reply. The tribunal will then make a final decision.