The power in TransCanada Pipe-Lines Ltd. (TCPL) is about a metre wide and 10,593 km long, stretching from Burstall, which is near the Alberta-Saskatchewan border, to Montreal. It is a steel pipeline that carries compressed natural gas from the West to homes, offices and factories in the East. Since its founding in 1951, the Calgary-based company, whose executives are based in Toronto, has built up $6 billion in assets. But last week TCPL made a second bid, which would almost double its size, with one daring move: a complicated $5.5-billion offer for foundering Dome Petroleum Ltd. But the strategy failed when Dome announced that it was accepting a relatively simple $5.1-billion purchase proposal from Amoco Canada Petroleum Co. Ltd.
Officially, TCPL’s offer for the assets of debt-ridden Dome expired on Monday, April 20.
But late last week the pipeline company’s determined president, Gerald Maier, was still assessing the possibility of a new proposal that Dome might consider. If the 58-year-old Maier succeeded, TCPL would also further extend the sprawling holdings of its parent, Montreal-based Bell Canada Enterprises Inc. (BCE), the largest conglomerate in the country.
Demand: The quest for Dome is part of Maier’s drive to move TCPL away from its dependence on a stagnant pipeline industry in North America. The demand for natural gas is growing at a rate of only two per cent a year in Canada, while U.S. consumption is declining. Last year that factor, together with low oil prices, cut the company’s earnings to $60.6 million from $162.5 million in 1985. But with Dome’s assets, 20th-place TCPL would become the fifth-largest Canadian oil producer and would eclipse all Canadian competitors in natural gas sales and reserves.
TCPL’s ability to expand improved significantly in December, 1983, when BCE took a 44-per-cent interest in the pipeline company, which was increased to 48 per cent the following year. The new owner provided it with the extra financial backing it needed to contemplate major acquisitions. BCE, Canada’s most profitable company, had earnings of $1
billion in 1986. Maier’s first major takeover target was Home Oil Co. Ltd., an oil and gas subsidiary of Toronto-based Hiram Walker Resources Ltd. In April, 1986, equipped with a war chest of $600 million and supported by $200 million from BCE, Maier led TCPL into a bitter takeover battle for Walker against the Reichmann family’s Gulf Canada Corp. The Reichmanns, who have a reputation for rarely losing takeovers, won at a price that TCPL could not match.
Now, in the bid for Dome, the stakes
are much higher for both TCPL and Maier. Dome owned TCPL from 1979 to 1983. And when Dome acquired Hudson’s Bay Oil and Gas Co. Ltd. (HBOG) in 1982, it forced TCPL to buy 12.5 per cent of the assets. But under a joint agreement, Dome operated the properties while TCPL remained a frustrated passive partner. Said Neil Nichols, TCPL’s chief financial officer: “Because of
Dome’s [poor] health, it was losing some of the properties.” He added: “Now it is important that we get Dome. If we do not, we still end up with 12.5 per cent of what is left of it, and I would not want to go to Amoco to strike a new deal.” Disgusted: For his part, Maier has had a stormy personal relationship with Dome. Before joining TCPL in 1985, he was chairman of HBOG—a position he
held when Dome acquired that company in 1982. Last week, in his Toronto office, Maier still expressed anger at that distant deal, which took place under the favorable terms of the National Energy Program. He told Maclean's, “I was disgusted at the way the public was steamrollered into thinking it was a good thing when I could see it would destroy two companies, not one.”
Gloom: Maier said that if TCPL wins control of Dome, he plans to create an independent Canadian oil and gas
company. Existing Dome shareholders would retain approximately 20-per-cent equity in the new company, while TCPL would hold about 80 per cent, TCPL has already told Dome’s chairman, Howard Macdonald, that more money is available. But it was unclear late last week just how enthusiastic parent Bell Canada would be about improving the bid for Dome. Stuart Spalding, BCE’s executive vice-president of finance, said that the parent company is not pushing Maier to bid up the price. But although gloom pervaded the TCPL offices late last week, Maier refused to admit defeat. “On a scale of one to 10,” he said, “my hopes are about in the middle.”
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