This transaction represents one of the more obvious, in terms of competition issues and potential regulatory delays, with or without forced divestitures.
A secondary issue has surfaced in the form of overlaps in Ion Exchange Resins. Below is a market share chart for this chemical niche from roughly 2003:
Ion-exchange resins Market Shares
1. ROH- 32%
2. Purolite - 27%
3. DOW- 11%
4. Bayer - 8%
5. Others - 22%
These products are best defined as follows:
"Ion-exchange resins, which pick up positively or negatively charged particles in the water stream, are employed in systems with two towers that alternate between water processing and resin regeneration. In the regeneration cycle, salt or acid is added to effect a reverse ionic exchange, thus removing the contaminants and preparing the resin for reuse."
The current impression is that this overlap will receive some interest from regulators, but very likely not on the level as the acrylic issue. However, the ion exchange resins overlap must be considered another potential problem with respect to timing, if only in terms of adding to the breadth and complexity of the regulatory process.
At this stage, there is absolutely no reason to alter the original analysis, which anticipates an extremely high chance (+40%)of this deal's close slipping into the second quarter of 2009.
CHC Helicopter Corp. (FLI) - First Reserve Corp.
July 29, 2008 (10:45a) - Status Report FLI has included the following passages in its annual report (Management Discussion) filed on June 25:
"Completion of the Arrangement is subject to certain conditions, including obtaining approvals or confirmations from certain European aviation regulatory authorities as well as the Canadian Transportation Agency regarding the granting or maintaining of required licenses and permits following completion of the transaction. The Arrangement is also subject to a number of other customary conditions. The Arrangement is not subject to any financing condition."
"While the timing associated with satisfying the above noted conditions is not certain, the Company currently expects the Arrangement to close by September 15, 2008, subject to terms of the agreement."
Obviously, this transaction's voluminous regulatory requirements will delay the close beyond this month and into August, at least, as was generally expected. Unfortunately, despite continuous efforts, details of the various aviation reviews have been literally impossible to obtain. In most jurisdiction, the aviation authorities simply refuse to respond to inquiries, while others have strict policies regarding the release of information for pending matters. The UK CAA claims it is prevented from discussing even previous reviews, regardless of outcome.
The general sense at this point -- and this is again based on virtually no reference point for transaction of this nature -- is that most, if not all, of the aviation regulators are coordinating their efforts with respect to this transaction. It can only be speculated that the Canadian CTA is the key regulator in this situation and that it's consent will ultimately facilitate the completion of this transaction. However, the CTA also will not offer any relevant information on this case, so outcome and/or timing is very difficult to assess at this point.
The overall impression is that the companies will obtain the required consents within the next four to six weeks. It must be stated again that this assessment is not based on direct information from the companies or, more importantly, the regulators involved. Nevertheless, we currently expect to see developments with the various regulators before the September 15 projected close.
