From Today's Calgary Herald (Wednesday July 15, 1998)
Superior viewed as front-runner to buy ICG
Jeffery Jones
Reuters
Superior Propane Inc., Canada's largest propane distributor, is a front runner in talks to buy out its biggest rival from Petro-Canada, industry sources say.
The deal could be valued at more than $200 million.
If Superior signs an agreement to purchase Petro-Canada subsidiary ICG Propane Inc., it would have a dominant position in Canadian retail and wholesale propane sales, with a market share of about 70 percent.
Analysts said that figure could raise questions from Canada's Competition Bureau, whose concerns over market dominance last month prompted Petro-Canada and Ultramar Diamond Shamrock Corp. to cancel a proposal to form a major gasoline marketing alliance.
A purchase of ICG by Superior which was once a wholly owned unit of Norcen Energy Resources Ltd., would be positive for Superior from an operational standpoint, said Scotia Capital Markets analyst Leslie Lefebvre. Adding she could not confirm if the companies are in talks.
"It's certainly being speculated on, there's no question about that. And I think there would be a lot available in the way of synergies." Lefebvre said.
"The big question mark is going to be whether or not they are able to get that past the Competition Bureau."
Amid a jittery stock market, Petro Canada in late June scuttled plans to spin ICG off into an income trust. In withdrawing its preliminary prospectus, it said potential buyers for the unit emerged, but did not reveal with whom it was in negotiation.
Petro-Canada spokesman John Percic said Tuesday that a deal to sell ICG would be announced soon, but said he could not provide the name of the suitor or a more precise time frame.
In 1997, ICG sold more than a billion litres of propane, a natural gas byproduct used as a fuel for transportation, heating and barbecuing, giving it a 20 per-cent market share in Canada. ICG revenues totaled $311 million for the year.
Superior, publicly traded since 1996 through the Superior Propane Income Fund, has a 40-per-cent market share.
In late May, a group of former Norcen senior executives and fund manager Enerprise Capital Management Inc. paid $68.3 million for the 10-per-cent stake in Superior's income fund then held by Union Pacific Resources Group Inc. of For Worth Tex., which gained the stake in its $3.7 billion-US takeover of Norcen.
Under the deal, the executives, including former Norcen chief executive Grant Billing, also assumed management of Superior Propane Income Fund. Billing said at the time that a key part of his strategy would be to search for acquisitions both inside and outside the propane distribution business.
He declined to say Monday, however, if Superior is in talks to buy ICG from Petro-Canda.
"We're kind of following that one pretty closely because it's pretty important to us as a major competitor as to what they are doing. I guess all I can say at this point is that we're following it with interest," Billing said.
One analyst said he did not believe Canada's competition watchdog would allow a Superior takeover of ICG, and that a purchase by a U.S.-based master limited partnership interested in cross-border expansion was more likely.
"Combined, they'd have over 70 per cent of the Canadian propane market and I just don't see how the Competition Bureau is going to agree to something like that," said Robert Hinckley, with Merrill Lynch & Co. in New York.
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