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Arthur Andersen Canada has signed a deal to merge with Deloitte & Touche LLP, creating the largest accounting firm in the country.

Andersen Canada announced the agreement late yesterday, revealing it chose Deloitte over KPMG. Andersen and KPMG had previously announced they were holding talks as part of a proposed worldwide deal between the two firms.

When those international merger talks unraveled last week, Andersen began to consider other suitors, Andersen spokesman Roy Fraser said yesterday. Deloitte has succeeded in acquiring a number of national practices of Andersen, including its British practice earlier this week.

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"We got to a position where we just needed to reassess our position here in Canada, from a Canadian perspective," Mr. Fraser said. "We've been telling people all along that there have been other interested parties at the table talking with us, and we chose the partner that best met the objectives of our Canadian clients and our people."

The companies are not disclosing the purchase price, and the heads of the two Canadian firms were unavailable for comment late yesterday. The companies expect the deal to close in early June, and the combined firm will be called Deloitte & Touche.

"This is a very exciting transaction for Deloitte and our people," said Colin Taylor, Deloitte's Canadian chief executive officer.

"Both firms have outstanding professionals and the transaction will offer even greater development opportunities to our people."

Andersen Canada wants to conclude a deal quickly because of the lingering uncertainty caused by the problems facing Arthur Andersen LLP in the United States. The U.S. firm has been rocked by the collapse of audit client Enron Corp., and has been indicted for obstruction of justice for shredding Enron documents.

"We think it's important to provide that certainty and that stability for our clients, and for our people to be more assured of their futures," Mr. Fraser said.

Andersen Canada has managed to keep all its major audit clients, despite the defection of numerous clients from the U.S. firm.

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"Our Canadian clients have shown great loyalty to us," Andersen CEO Russel Robertson said in a statement. "As a part of Deloitte & Touche, we can provide them with additional confidence that they can be served by world-class professionals with a global network to match."

Deloitte is expected to absorb the entire operations of Andersen Canada with minimal staff losses. Deloitte Canada has 5,600 employees, while Andersen has 1,400. Mr. Taylor will remain CEO of the combined firm.

Mr. Fraser said there have been no decisions about the management roles that will be held by Andersen Canada's senior officials, including Mr. Robertson.

"I don't think it's been decided. In principle, there will be a sharing of management responsibilities with Andersen partners and Deloitte partners," he said. "At this point, the only thing that has been clearly defined is that Colin will continue as the CEO. But there will be roles defined in the future."

The merger will create the largest accounting firm in Canada. According to an accounting industry publication, Deloitte & Touche had revenue last year of $895-million, while Andersen Canada had revenue of $230-million. The largest Canadian firm, PricewaterhouseCoopers, had revenue of $1.01-billion in 2001.

Deloitte has already struck deals to acquire Andersen operations in Britain, Spain, Portugal, Mexico, Brazil and the Netherlands.

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