As reported in a CSP Daily News Flash, to facilitate a $40 billion merger with Petro-Canada, Suncor must sell one-quarter of its Sunoco-branded gas stations in Ontario after taking over Petro-Canada's retail network, the tribunal said Wednesday, [image-nocss] according to a report by The Calgary Herald. Suncor must shed 70 of its 272 Sunoco retail locations in Ontario, while Petro-Canada must sell 34 stations under the terms of the consent agreement filed under the Competition Act.
"The Commissioner of Competition has concluded that the [merger] is likely to prevent or lessen competition substantially in respect of the retail marketing of gasoline in certain geographic areas in Ontario and in respect of the wholesale supply of gasoline in the Greater Toronto Area," the revised consent agreement said.
Click here to view the full text of the revised consent agreement.
Suncor Energy Inc. completed its merger with Petro-Canada on August 1. Suncor Energy is now Canada's largest energy company and the fifth largest North American-based energy company by market value. The new Suncor combines a leading position in Canada's oil sands with complementary operations in refining and marketing, North American natural gas production and conventional production internationally and offshore East Coast Canada. The company also holds a significant position in Canada's emerging renewable energy industry with wind power projects and biofuels production.
While the company will operate corporately and trade under the Suncor Energy name, it will maintain the trusted Petro-Canada brand for its refined products and national retail network and as a partner of the 2010 Olympic and Paralympic Winter Games.
Suncor's merger with Petro-Canada created the country's largest integrated oil company that both produces and refines oil and gas, which it sells through approximately 1,500 retail outlets from coast to coast.
According to Suncor spokesperson Victoria Barrington, the locations to be sold were negotiated and agreed to with the consent of government representatives, who will appoint a monitor to oversee the sale. The company is required to make "reasonable commercial efforts" to sell the identified stations and terminals to qualified buyers during an initial sale period to be completed within an undisclosed period of time. Any "residual assets" that remain unsold following the initial period will be disposed of at the sole discretion of an appointed trustee.
"We are communicating with our retailers and will honor all existing contracts and agreements that are in place," she added.
The consent agreement further requires Suncor to supply the sold stations with equivalent volumes of refined products at similar prices and terms. In addition, it will not be able to re-acquire the stations through any direct or arm's length subsidiaries for at least 10 years, the report said.
Michael Ervin, with Calgary, Alberta-based consulting firm MJ Ervin and Associates, told the paper that the stations could be sold individually or packaged to smaller nonrefining players, which leaves the field almost wide open for potential buyers.
Ervin said 104 stations is "not a drop in the bucket" in the southern Ontario gasoline market, and said that the divestiture process is somewhat unprecedented given the lack of consolidation in Canada's integrated oil and gas sector. "It's pretty rare, because we haven't seen two large downstream companies merge before," he said.
He added that it is unlikely that many, if any, independent owner-operated stations would be affected by the sale. "There are very few of those leasee operations left," he said. "They used to be a big part of the retail landscape 20 years ago, but not so much today."
The majority of the locations are situated in suburban Toronto, in places such as Mississauga and Markham, extending as far as Hamilton and London. But the exact identity of the outlets is mostly a moot point, said the Herald, as Suncor CEO Rick George has said all existing Sunoco stations would eventually be rebranded under the Petro-Canada banner.
Click here for previous CSP Daily news coverage of Suncor and Petro-Canada.
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