Superior Plus says it's no longer planning to buy Canexus Corp. through a friendly takeover that would have combined two of Canada's largest industrial chemical companies.
Toronto-based Superior Plus made the announcement early Thursday morning, days after the U.S. Federal Trade Commission said it would try to block the transaction because of its impact on competition in North America's sodium chlorate market.
Calgary-based Canexus and Superior had previously said they were prepared to fight the commission's challenge.
But Superior Plus said before stock markets opened that it was exercising its option to terminate the offer because the two companies had not been able to agree on an extension to a Wednesday deadline for finalizing the merger.
Canexus said later that a legal battle with the FTC would have involved significant additional costs and risks and that it wanted some assurances that Superior would provide it with "reasonable protections."
"If Superior had been willing to provide enhanced financial security and operational flexibility to Canexus in the event that legal proceedings were unsuccessful, we would have persevered," Arthur Korpach, chair of a special committee of directors at Canexus, said in a statement.
"In the absence of those reasonable protections, our board and management determined that the interests of Canexus and its shareholders would be best served by continuing to execute our current strategy."
The companies' agreement included a provision for either party to pay a $25-million fee to the other under certain circumstances if the transaction didn't go through.
Superior's announcement didn't mention the termination fees but Canexus said that it will "take all necessary steps" to recover the $25-million and "vigorously disagrees" with any contention that it breached the deal.
The companies announced the all-stock agreement on Oct. 6, saying it valued the Canexus equity at $316-million. Including the assumed debt, the deal was worth $932-million at the time of the announcement.