Lexpert Magazine

Jan/Feb 2017

Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.

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30 LEXPERT MAGAZINE | JANUARY/FEBRUARY 2017 1 Fortis's Acquisition of ITC Holdings Relationships were the catalyst for Fortis Inc.'s acquisition of ITC Holdings Corp. — or at least a relationship. According to Fortis external counsel Jim Reid of Davies Ward Phillips & Vineberg LLP, it was a meeting between Barry Perry, CEO of For- tis Group, and Joseph Welch, founder and then CEO of ITC Holdings Corp., which got the deal rolling with Fortis. Fortis notes on its website that the com- pany owns 10 utility operations in 17 loca- tions in Canada, the United States and the Caribbean. "is is their third significant US acquisition," said Reid, "and the culmi- nation of a longer-term strategy." e lead- ership team at Fortis asks, "What compa- nies are out there and what opportunities might there be?" In this deal, the Can-Am currency ex- change rate did amount to quite a bump. Exchange rates affected the financing metrics, and Fortis had a period of "pens down." Said Reid: Fortis "re-evaluated, got a bit more creative. … If Fortis offered shares as well as cash," the deal could work. is would require Fortis to get the approv- al of its own shareholders and get listed on the New York Stock Exchange. e deal needed approval of both sets of shareholders, as it turned out. To make the accretion work, they brought in an equity partner. is involved Fortis running an auction and thereby bringing in a minority investor: GIC Private Ltd. Fortis Inc. and GIC's acquisition of ITC Holdings Corp. required and received authorization from nine regulatory authorities, including the Federal Energy Regulatory Commission. A significant portion of Fortis's business is now subject to FERC authority. Fortis is now among the top 15 North American regulated investor-owned utili- ties ranked by enterprise value. "Today is a special day for Fortis and ITC," Perry told media. "Our teams have worked tirelessly over the past year to make this acquisition happen, and we couldn't be more pleased to welcome ITC to the Fortis group of utili- ties. e ITC acquisition is the largest in the history of Fortis, dramatically increas- ing our North American footprint. It es- tablishes significant scale and a new plat- form in the electric transmission sector." And it started with that personal rela- tionship. As Reid explains, a real personal relationship does not mean there is going to be a different result for shareholders if another bidder comes along. What it does mean, however, is that "when there are bumps in the road," there is sufficient goodwill between the two leaders that they can "challenge their teams to come up with creative solutions." On the legal side, success has many par- ents, and several of the law firms involved were in the US. On the Canadian side, Reid gives credit to the in-house lead, Da- vid Bennett, and Bennett credits his team members, Paul Fitzpatrick, Regan O'Dea and Lindsay Hollett. Both Scotiabank and Goldman were on as financial advisors. e deal was "transformational," said Reid. Notwithstanding the exchange-rate chal- lenge, Reid said the "Canadian capital mar- kets were very supportive" with Canadian investors seeming to take a "more patient view" of the overall and long-term picture. Key Legal Players Fortis advisors: Regan O'Dea, Paul Fitz- patrick, Lindsay Hollett (in-house); White & Case LLP; Davies Ward Phillips & Vineberg LLP (M&A/corporate securities, banking, tax); McInnes Cooper ITC Holdings advisors: Simpson acher & Bartlett LLP; Jones Day LLP; Torys LLP (Canadian M&A, regulatory); Dykema LLP Goldman Sachs advisor: Osler, Hoskin & Harcourt LLP (M&A) Counsel to financial advisors/lenders: Skadden, Arps, Slate, Meagher & Flom LLP; Cravath, Swaine & Moore; Fasken Martineau DuMoulin LLP (M&A); Kirkland & Ellis LLP 2 Suncor's Acquisition of Canadian Oil Sands On March 21, 2016, Suncor Energy Inc. completed its acquisition of Canadian Oil Sands Ltd. e transaction began as an un- solicited takeover bid made by Suncor on October 5, 2015, under which Suncor of- fered 0.25 of a Suncor share for each COS share, and was subsequently completed following the signing of a Support Agree- ment by Suncor and COS on January 17, 2016, pursuant to which Suncor agreed to increase its offer price to 0.28 of a Suncor share for each COS share, with the amend- ed offer supported by the COS board of directors. On February 5, 2016, Suncor acquired approximately 73 per cent of the COS shares and replaced the COS board of directors and management team with Suncor nominees. Suncor extended its of- fer until February 22, 2016, and acquired a further 11 per cent of the COS shares on that date. On March 21, Suncor completed the transaction by acquiring the remaining 16 per cent of the common shares of COS that Suncor did not own pursuant to a sub- sequent acquisition transaction approved at a meeting of COS shareholders. As a result of the transaction, Suncor, which is Canada's largest integrated oil company, increased its ownership position in the Syncrude oil sands project from 12 per cent to 48.74 per cent, as COS's sole material asset was its 36.74-per-cent inter- est in Syncrude. Suncor was represented by Blake, Cas- sels & Graydon LLP with a team that included Chad Schneider. Schneider had this to say about the deal: "e things that made it unique included that it is relatively rare to see a hostile deal in the oil patch. at wasn't the way things were done. Also, this was a share exchange. en layer on extreme uncertainty in the oil prices. No one was sure where the bot- | TOP DEALS |

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