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<strong>the</strong> Tribunal upheld <strong>the</strong> <strong>com</strong>pany position.<br />
“The decision was viewed as a tremendous<br />
upset, but we were not surprised,” says<br />
Facey. The deal closed <strong>the</strong> next day as a <strong>full</strong><br />
merger between <strong>the</strong> <strong>com</strong>panies.<br />
An Extraordinary Offer<br />
“Lakeport’s concerns in structuring <strong>this</strong><br />
acquisition centered on <strong>com</strong>petition ra<strong>the</strong>r<br />
than finance,” recalls Thorburn, “so we<br />
made addressing those concerns <strong>the</strong> key to<br />
our transactional structure.” Labatt’s terms<br />
How Canada Regulates<br />
in part by a trust amendment that <strong>the</strong><br />
<strong>com</strong>panies had negotiated to prevent<br />
holdouts. Thorburn believes that prior to<br />
<strong>the</strong> Tribunal decision, publicly held<br />
<strong>com</strong>panies increasingly shied away from<br />
deals with antitrust issues, <strong>of</strong>ten opening<br />
<strong>the</strong> door to private equity interests as<br />
purchasers. Now, he asserts, “<strong>the</strong> regulatory<br />
playing field has been leveled, and <strong>the</strong><br />
rewards will go to those <strong>com</strong>panies that<br />
are innovative and aggressive in taking<br />
advantage.”<br />
The Competition Bureau is part <strong>of</strong> Industry Canada, a federal government<br />
department, and is responsible for maintaining and encouraging fair <strong>com</strong>petition<br />
in Canada. The Bureau administers four key pieces <strong>of</strong> federal legislation, including<br />
<strong>the</strong> Competition Act and <strong>the</strong> Consumer Packaging and Labelling Act. Competition<br />
litigation in Canada involves representing clients before <strong>the</strong> courts on criminal<br />
matters and before <strong>the</strong> Competition Tribunal on civil proceedings initiated by <strong>the</strong><br />
Competition Bureau. The Competition Tribunal is a strictly adjudicative body that<br />
operates independently <strong>of</strong> any government department and that hears and decides<br />
all civil controversies that arise under <strong>the</strong> four <strong>com</strong>petition statutes. The<br />
Competition Bureau has said it intends to appeal <strong>the</strong> Tribunal’s Labatt decision to<br />
<strong>the</strong> Federal Court <strong>of</strong> Appeal, which has broad jurisdiction to hear federal civil and<br />
criminal matters, but a ruling is some months <strong>of</strong>f and would not void Labatt’s<br />
acquisition <strong>of</strong> Lakeport.<br />
kept <strong>the</strong> pressure on ourselves to meet<br />
every deadline <strong>the</strong> Bureau set.” When <strong>the</strong><br />
Competition Bureau issued a Section 11<br />
Order requiring substantially more<br />
<strong>document</strong>s within a 21-day period, <strong>the</strong><br />
Labatt team relied on <strong>com</strong>panywide<br />
resources to <strong>com</strong>ply.<br />
Such effort and preparation were <strong>the</strong><br />
foundation <strong>of</strong> Labatt’s decision to assume<br />
<strong>the</strong> risk <strong>of</strong> <strong>the</strong> deal through <strong>the</strong> breakup<br />
fee. “For both our own management and<br />
<strong>the</strong> Lakeport unit holders, <strong>the</strong> risk was<br />
a calculated one for <strong>the</strong> right reward,”<br />
says Rabkin. “We knew <strong>the</strong> marketplace<br />
and were confident in <strong>the</strong> arguments we<br />
prepared. The Tribunal agreed with our<br />
position.” Future acquisition transactions<br />
in Canada may indeed adopt a similar<br />
approach to <strong>the</strong> regulatory review<br />
process.<br />
Susan M. Rabkin is vice president and general<br />
counsel – North America <strong>of</strong> Labatt Brewing<br />
Co. Ltd. She may be reached at<br />
susan.rabkin@labatt.<strong>com</strong>.<br />
Brian A. Facey is a partner in <strong>the</strong> Competition<br />
Law practice <strong>of</strong> Blake, Cassels & Graydon LLP.<br />
He may be reached at brian.facey@blakes.<strong>com</strong>.<br />
Craig C. Thorburn is a partner in <strong>the</strong> Business<br />
Law practice <strong>of</strong> Blake, Cassels & Graydon LLP.<br />
He is Peer Review Rated. Craig may be reached<br />
at craig.thorburn@blakes.<strong>com</strong>.<br />
included what Thorburn calls <strong>the</strong><br />
“extraordinary <strong>of</strong>fer” <strong>of</strong> paying Lakeport a<br />
$5 million CAD breakup fee if <strong>the</strong> deal<br />
did not go through on time. The confidence<br />
<strong>of</strong> <strong>the</strong> <strong>com</strong>pany and its counsel in <strong>the</strong>ir<br />
regulatory review strategy justified <strong>the</strong> riskreward<br />
trade-<strong>of</strong>f.<br />
Lakeport was owned by unit holders<br />
(including its founders) <strong>of</strong> an in<strong>com</strong>e trust,<br />
and <strong>the</strong> transaction itself was a cash <strong>of</strong>fer<br />
<strong>of</strong> $28 CAD per unit. The units traded<br />
on <strong>the</strong> Toronto Stock Exchange and <strong>the</strong>ir<br />
price had fallen in <strong>the</strong> days before <strong>the</strong><br />
Tribunal ruling on fears <strong>of</strong> an unfavorable<br />
result. Once <strong>the</strong> ruling was announced, all<br />
remaining outstanding units were tendered<br />
within 24 hours—a result made possible<br />
Keeping <strong>the</strong> Pressure On<br />
Rabkin, as in-house counsel, took <strong>the</strong> lead<br />
in convincing Labatt’s corporate parent<br />
that <strong>the</strong> <strong>com</strong>petition risks <strong>of</strong> <strong>the</strong> Lakeport<br />
transaction were justified by <strong>the</strong> potential<br />
market advantages, and selected Blakes as<br />
<strong>the</strong> law firm to manage those risks. “Our<br />
whole strategy was predicated on <strong>the</strong><br />
belief that <strong>com</strong>petition law is changing, and<br />
that <strong>the</strong> right arguments could present a<br />
sophisticated case for approval,” she asserts.<br />
Labatt had previously lost an acquisition<br />
target to an <strong>of</strong>fshore <strong>com</strong>petitor during <strong>the</strong><br />
delay caused by extended regulatory review,<br />
so <strong>the</strong> <strong>com</strong>pany was already prepared to<br />
<strong>of</strong>fer <strong>the</strong> information <strong>the</strong> Competition<br />
Bureau would require. Rabkin adds, “We<br />
Blake, Cassels & Graydon LLP has over<br />
500 lawyers across Canada, <strong>the</strong> United<br />
States, <strong>the</strong> United Kingdom and China.<br />
The firm’s integrated <strong>of</strong>fice network<br />
provides access to a <strong>full</strong> spectrum <strong>of</strong><br />
capabilities in every area <strong>of</strong> Canadian<br />
business law.<br />
JULY 2007<br />
15