MEG shares soar as analysts predict Husky will strengthen hostile takeover offer
Monetary analysts say Husky Vitality Inc. will seemingly need to sweeten its $Three.Three-billion hostile takeover bid for fellow Calgary oilsands producer MEG Vitality Corp., though they concede there are few white knights which can be large enough to trip to its rescue.
In its supply Sunday, Husky stated it was going on to MEG’s shareholders after its board refused to think about a proposal.
READ MORE: Calgary-based Husky Vitality makes $6.4B hostile bid to amass MEG Vitality
Shares in MEG soared in early buying and selling on the Toronto Inventory Trade on Monday to as excessive as $11.70, surpassing Husky’s $11 per share cash-or-shares bid, earlier than falling again to hover close to the bid stage.
Husky shares have been down $1.39 or about six per cent at $21.29 at about 11 a.m. ET.
The scenario is just like Suncor Vitality Inc.’s courting of rival Canadian Oil Sands three years in the past the place there was inadequate assist for the preliminary hostile bid, no competing supply emerged and three months later the 2 firms agreed to a deal that was 12 per cent greater, stated Michael Dunn, an analyst for GMP FirstEnergy.
The bid may go as excessive as $15 per share, stated analyst Phil Skolnick of Eight Capital Analysis in a word, suggesting that Calgary-based oilsands producers Suncor or Imperial Oil Ltd. have been among the many few companies that would mount a counter supply.
On a Monday morning convention name, Husky CEO Rob Peabody stated MEG has outperformed operationally at its Christina Lake improvement in northeastern Alberta however has didn’t ship worth to shareholders.
“It’s troublesome to see this sample of efficiency altering any time quickly given their restricted monetary flexibility and publicity to heavy oil differentials,” he stated.
“MEG’s extremely burdened steadiness sheet leaves them with few choices. Their web debt is kind of a bit bigger than their market cap.”
As a result of MEG produces solely uncooked bitumen, it’s extra uncovered to massive Canadian heavy oil reductions than Husky, whose bitumen manufacturing is balanced by refinery output, stated analyst Nick Lupick of AltaCorp Capital in a word that stated Husky’s supply is “opportunistic.”
READ MORE: Oilsands firms upbeat about future after Q2 outcomes
Watch beneath: In the summertime of 2018, Doug Vaessen reported on how rising oil costs have been serving to to spice up Alberta’s financial system.
The blended firm would have a a lot greater publicity to heavy oil reductions as its total manufacturing rises to about 410,000 barrels of oil equal per day from Husky’s output of 296,000 boe/d on the finish of the second quarter, he added.
The hostile supply is for a mix of money or shares value $11 for every MEG share. The utmost money out there underneath the deal is capped at $1 billion and the utmost variety of shares is proscribed to 107 million.
MEG stated it has fashioned a particular committee to think about Husky’s bid when it’s obtained and has requested shareholders to take no motion till it might probably make suggestions.
Husky values the transaction at $6.four billion, together with the idea of $Three.1 billion in debt, and says the proposal might be open for acceptance by MEG shareholders till Jan. 16.
It says the blended firm would notice $200 million in annual monetary, operational and different synergies.
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