Canadian company Husky Energy has made a proposal to acquire all outstanding shares of oil sands producer MEG Energy in a transaction that values MEG at a total enterprise value of C$6.4bn ($4.95bn).
The deal includes equity consideration of C$3.3bn ($2.55bn) and assumption of C$3.1bn ($2.4bn) of net debt.
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Pursuant to the terms of the offer, MEG shareholders will have an option to choose to receive a consideration of C$11 ($8.52) in cash or 0.485 of a Husky share for each share they hold in the company.
Husky expects the transaction to yield C$200m ($154.93m) in identified annual financial, operational and other synergies. The deal is anticipated to be accretive to the company’s free cash flow, earnings and production on a per share basis.
The combined entity will be headquartered in Calgary, Alberta, and have total upstream production of more than 410,000 barrels of oil equivalent per day (boe/d) and downstream refining and upgrading capacity of nearly 400,000 barrels per day (bbl/d).
Husky noted that it will take the offer directly to MEG shareholders after it failed to engage the latter’s board of directors in discussions for the transaction.
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By GlobalDataHusky Energy CEO Rob Peabody said: “Husky is confident the proposed transaction is in the best interests of Husky and MEG shareholders, employees and stakeholders.
“While Husky remains prepared to engage in discussions with MEG’s board of directors to complete the transaction expeditiously for the benefit of MEG shareholders, it intends to commence an offer directly to MEG shareholders by way of a takeover bid so they can determine the future of their investment.
“Husky continues to deliver on our five-year plan – maintaining a strong balance sheet while reducing our cost structure, increasing our production and margins and improving our ability to generate free cash flow – we are uniquely positioned to deliver strong value to MEG shareholders.”
The combined business will have expertise in carbon capture and storage, energy efficiency, enhanced steam-assisted gravity drainage (SAGD) and diluent reduction technology.
MEG is focused on sustainable in situ development and production in the Southern Athabasca region of Alberta.
