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(Bloomberg) — Keyera Corp. shares plunged the most in more than five years after regulators announced plans to challenge the planned acquisition of Plains All American Pipeline LP’s Canadian natural gas liquids business.
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The stock fell as much as 7.6% on Tuesday after Canada’s Competition Bureau said the proposed transaction “is likely to harm competition in natural gas liquids processing and storage, particularly at Fort Saskatchewan, Alberta, Canada’s primary hub for these services.” The deal would leave Keyera and Pembina Pipeline Corp. as the sole operators at the hub.
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“We’ve identified Pembina is the only effective remaining competitor in Saskatchewan hub,” Hira Ahmad, the bureau’s manager of competition law, said during a media briefing. “The fact that Pembina is the only other competitor already suggests to us that is the highly concentrated industry. And with this merger now between Keyera and Plains, this concentration is likely to increase and harm competition.”
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The case will now go before a tribunal. Shares touched C$48.925 ($35.94) in Toronto and were trading at C$50.48 at 1:55 p.m.
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The company pushed back at the regulator’s statement, saying the “transaction will strengthen competition across the basin and provide customers with improved access to key markets and greater flexibility in how their products are handled, transported and sold” according to a statement. “This regulatory proceeding does not prevent the company’s ability to close the Transaction.”
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A negative ruling may mean “at least a partial divestiture is required,” Spiro Dounis, a Citigroup Global Markets Inc. analyst, wrote in a note.
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(Adds comment from Competition Bureau official in third paragraph.)
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