UPDATE 1 – The Husky Energy offer from Canada to buy MEG Energy in a deal of $ 5 billion Energy and oil



(Add details of proposal, background)

Sept. 30 (Reuters) – Canadian oil and gas producer Husky Energy Inc. said on Sunday that it has offered to buy rival MEG Energy Corp. in a deal worth C $ 6.4 billion ($ 5 billion) including debt.

The combined company will have a total production of more than 410,000 barrels of oil equivalent per day (boepd) and a refining and upgrading capacity of about 400,000 barrels per day (bpd), Husky said.

The offer comes because many Canadian oil producers are struggling with transportation bottlenecks, as production has risen sharply, driving Canadian heavy rough to near-historical rebates for light American crude oil.

"In a time of increased market uncertainty, Husky believes the combined company will have an improved opportunity to accelerate new projects in Canada compared to two separate entities," Husky said in a statement.

MEG was not immediately available for comment.

Under the terms of the proposal, each MEG shareholder has the option to receive a fee of C $ 11 in cash or 0,485 of a Husky share for each share held.

This offer is subject to a maximum total cash compensation of C $ 1 billion and a maximum total number of issued Husky shares of approximately 107 million.

"The Board of Directors of MEG has refused to enter into a discussion about the benefits of a transaction, which gives us no choice but to bring this offer directly to the shareholders of MEG," said Chief Executive Rob Peabody.

The offer from Husky delivers a 44 percent premium from Friday for the 10-day volume-weighted average MEG share price of C $ 7.62 and a premium of 37 percent for MEG & # 39; s Friday closing of C $ 8.03.

Earlier this year, MEG agreed to sell some pipeline and storage assets in Alberta to Wolf Midstream Inc for C $ 1.61 billion ($ 1.28 billion) to repay debt and finance its flagship project in Athabasca.

Goldman Sachs Canada Inc acts as financial advisor and Osler, Hoskin & Harcourt LLP acts as the lead legal advisor to Husky.

The proposal, unanimously approved by the board of directors of Husky, is expected to result in C $ 200 million a year for short-term realizable synergies. ($ 1 = 1.2862 Canadian dollars) (Reporting by Devika Krishna Kumar in New York; Montage by Lisa Shumaker)


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