Canada's Suncor to buy Petro-Canada
Canada's Suncor to acquire Petro-Canada in CA$19.12 billion deal
* Rob Gillies, Associated Press Writer
* Monday March 23, 2009, 8:34 am EDT
TORONTO (AP) -- Suncor Energy Inc. will acquire Petro-Canada in a US$15.5 billion deal that will unite two of Canada's biggest oil companies, the companies announced Monday.
The move is expected to yield savings in operating costs of over CA$300 million (US$244 million) year, and annual capital efficiencies above CA$1 billion (US$812 million), the companies said.
Under the deal, Petro-Canada common shareholders will receive 1.28 common shares of the expanded company for each share of Petro-Canada, while Suncor shareholders will receive new shares on a one-for-one basis.
The share exchange represents a 25 percent premium for Petro-Canada shares, based on a 30-day weighted average of the share price. Based on the closing price Friday, the deal values Petro-Canada at CA$19.12 billion (US$15.5 billion)
Petro-Canada shareholders will hold 40 percent of the enlarged company and Suncor shareholders will hold 60 percent. Both companies are based in Calgary.
Monday's announcement marks the creation of the largest oil and gas company in Canada by market cap, though the merged entity will be smaller than other global heavyweights such as Exxon Mobil and ConocoPhillips, which boast market capitalizations of US$326.6 billion and US$55.97 billion respectively.
"This merger creates a made-in-Canada energy leader with the assets, cost structure and financial strength to compete globally," said Rick George, president and chief executive officer of Suncor, who will continue in those roles in the new company.
"The combined portfolio boasts the largest oil sands resource position, a strong Canadian downstream brand, solid conventional exploration and production assets, and low-cost production from Canada's east coast and internationally."
Both companies have put off projects to develop oil sands in Alberta because oil prices now are too low to make the projects viable. Alberta's once-booming oil sands sector has cooled as every major company has scrapped or delayed some expansion plans as the price of oil has plummeted from its record high last summer.
Industry officials estimate the oil sands in northern Alberta could yield as much as 175 billion barrels of oil, making Canada second only to Saudi Arabia in crude oil reserves.
Suncor, founded in 1953, is the world's second-largest oil sands producer. Both are former state-owned oil companies.
The deal is subject to approval by shareholders of both companies and government agencies.
"The merger will be good for shareholders of both companies with reduced capital requirements, operating efficiencies and complementary integration opportunities between upstream and downstream assets," said Ron Brenneman, president and chief executive officer of Petro-Canada. He will become executive vice chairman in the merged company.
Suncor, suncor.com
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