Husky Energy Proposes to Acquire MEG Energy For $11 Per Share in Cash and Shares in Transaction Valued at $6.4 Billion

Posted by OilVoice Press - OilVoice


Delivers immediate 44% premium for MEG shareholders

Opportunity to participate in Husky's dividend, currently yielding 2.2%, with potential for future increases

Accretive to Husky's free cash flow, funds from operations and earnings while maintaining Husky's strong balance sheet
and low-risk profile

Expected $200 million in identified annual financial, operational and other synergies

Transaction will immediately deliver – and exceed – MEG's announced Vision 2020 financial targets

Better prospects for share price performance, given increased scale and enhanced financial profile

Opportunity for employees to benefit from enhanced growth and development
as part of a stronger, combined Canadian company

Husky intends to commence a takeover bid to bring offer directly to MEG shareholders

Husky to host conference call on Monday, October 1, 2018 at 6 a.m. MT (8 a.m. ET)

CALGARY, Alberta, Sept. 30, 2018 (GLOBE NEWSWIRE) -- Husky Energy Inc. (TSX:HSE) (“Husky” or the “Company”) today announced a proposal to acquire all of the outstanding shares of MEG Energy Corp. (TSX:MEG) (“MEG”) for implied total equity consideration of approximately $3.3 billion. This proposal values MEG at an implied total enterprise value of $6.4 billion, including the assumption of approximately $3.1 billion of net debt.

Under the terms of Husky's proposal, each MEG shareholder will have the option to choose to receive consideration per MEG share of $11 in cash or 0.485 of a Husky share, subject to maximum aggregate cash consideration of $1 billion and a maximum aggregate number of Husky shares issued of approximately 107 million. The share exchange ratio has been calculated based on Husky's closing share price of $22.68 as of Friday, September 28, 2018, the last trading day prior to this proposal, implying a mix of $3.21 in cash plus 0.344 of a Husky share per MEG share on a fully pro-rated basis.

Husky's proposal delivers an immediate 44 percent premium to the 10-day volume-weighted average MEG share price of $7.62 as of Friday, September 28, 2018 and a 37 percent premium to MEG's closing price of $8.03 as of that date.

Together Husky and MEG will create a stronger Canadian energy company, headquartered in Calgary, Alberta. The transaction will be accretive to Husky's free cash flow, funds from operations, earnings and production on a per share basis.

The combined company will have total Upstream production of more than 410,000 barrels of oil equivalent per day (boe/day) and Downstream refining and upgrading capacity of approximately 400,000 barrels per day (bbls/day), providing for increased free cash flow per share, production growth and a basis for potential future dividend increases.

“Husky is confident the proposed transaction is in the best interests of Husky and MEG shareholders, employees and stakeholders,” said CEO Rob Peabody. “However, to date, the MEG Board of Directors has refused to engage in a discussion on the merits of a transaction, giving us no option but to bring this offer directly to MEG shareholders.”

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,” said Peabody.

“Along our Integrated Corridor business, the physical integration of our Upstream and Downstream operations, including our committed pipeline capacity, shield us from location and quality differentials. In the Offshore business, our fixed-price contracts in Asia and high-netback Atlantic production provide for additional stability in funds from operations.”

Husky currently has more than 6,000 employees and contractors, plus an additional 2,400 skilled tradespeople working on maintenance and construction projects. The transaction will result in a stronger combined technical and operating team that can apply its expertise across a larger asset base.

The combined company will be an innovation leader in carbon capture and storage, energy efficiency, enhanced SAGD and diluent reduction technology, with greater opportunities to invest in advanced technologies that reduce CO2 emissions.

“We recognize the significant capabilities of MEG's talented team,” added Peabody. “We believe MEG and Husky employees will benefit from substantial opportunities for growth and development as part of a stronger, combined Canadian company.”

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.

Now in its 80th year, Husky maintains a strong commitment to Alberta and to Canada, and the communities in which it operates. Husky is one of Canada's largest private sector investors, with planned Canadian capital expenditures of more than $12 billion over its existing five-year plan. Ongoing investments include the West White Rose Project currently under construction in Newfoundland and Labrador, and a growing thermal program in Saskatchewan and Alberta.


• Premium to Market Price

  • 44% premium to the 10-day volume-weighted average share price of MEG on Friday, September 28, 2018.
  • 37% premium over MEG's closing price of $8.03 on Friday, September 28, 2018.

• Enhanced Shareholder Return Proposition With Lower Risk

  • Husky's strong balance sheet will allow for more free cash flow to be directed towards cash returns to shareholders and growth investments.
  • MEG shareholders will benefit from investment-grade credit ratings and a lower cost of capital.
  • MEG shareholders will participate in Husky's dividend yield, which is currently 2.2%, with potential for future increases as free cash flow improves.

• Physical Integration, Expanded Market Access and High-Netback Offshore Operations Provide Stability in Funds From Operations

  • MEG is currently highly exposed to discounted heavy oil prices.
  • Husky's pipeline network and refineries in Canada and the U.S. provide for more steady generation of funds from operations and protection from location and quality differentials.
  • MEG shareholders will gain exposure to Husky's high-netback Offshore business and fixed-price contracts, providing more stability in funds from operations.

• $200 Million Per Year in Near-Term, Realizable Synergies

  • $100 million per year of expected financial synergies, including debt refinancing with more favourable terms.
  • $70 million per year of expected operational synergies, including additional margin capture through Husky's Midstream and Downstream infrastructure and transportation commitments.
  • $30 million per year in other expected synergies, including reduction in combined corporate overhead and procurement savings.
  • Longer-term synergies include optimization of the combined capital spending program, deployment of technologies across the combined organization, combining best practices and operating expertise across a much larger asset base, and future investments to enhance Downstream integration.

• Immediately Achieves and Exceeds MEG's Announced 2020 Financial Targets

  • Optimize balance sheet: Expected 2019 net debt to EBITDA of less than 1.0 times, vs. MEG target of 2-3 times by 2020.
  • Advance technologies: A combined company can invest in a larger portfolio of technologies that can be applied across a much larger asset base.
  • Enhance business sustainability: The combined company will have a lower earnings break-even price of $40 per barrel US WTI and provide greater stability of free cash flow.
  • Maximize revenue per barrel: Husky's integrated operations and expanded market access results in greater value capture and reduced exposure to differential volatility.
  • Generate free cash flow: The combined company will immediately generate free cash flow, which can be used for returns to shareholders and growth investments.

• Significant Upside Through Stronger Combined Platform for Shareholder Value Creation

  • Despite having top quality assets and demonstrated production growth, MEG has failed to deliver value to shareholders.
  • The combined company will continue to create value as one of the top three Canadian thermal bitumen producers as it continues to advance its portfolio of high quality, high-netback thermal projects. Additionally, it will have significant refining capacity, pipeline transportation, storage and logistical assets, which help to shield it from location and quality differentials and support growth.


Funds from operations (FFO)3>$6 billion0-5%5-10% 
Free cash flow3>$1.5 billion0-5%10-15% 
Upstream production>410 mboe/day15-20%15-20% 
Earnings break-even$40/bbl   
Net debt to FFO3~1.0x   
1At Strip as of September 25, 2018: In 2019, WTI of $70.50 US/bbl and WTI-WCS differential of $26.26 US/bbl; In 2020, WTI of $66.45 US/bbl
and WTI-WCS differential of $25.43 US/bbl.

2Includes transaction and other one-time costs and assumes 50% of realizable annual synergies in 2019.
3Non-GAAP measures; refer to advisory.


The proposal has been unanimously approved by Husky's Board of Directors. It is not subject to any due diligence, financing or Husky shareholder approval conditions. Husky expects that the proposed transaction will be completed in the first quarter of 2019, subject to receipt of all necessary regulatory approvals, including under the Investment Canada Act and the Competition Act.


Full details of the Offer will be set out in the formal bid circular, which is expected to be filed on Tuesday, October 2, 2018 with the Canadian securities regulators, a copy of which will then be available at The Offer will be open for acceptance until 5 p.m. Eastern Time (3 p.m. Mountain Time) on Wednesday, January 16, 2019.

The Offer will be subject to certain conditions, including that the MEG shares tendered under the Offer constitute more than 66 2/3 percent of the shares of MEG then outstanding, on a fully-diluted basis. The Offer will also be conditional upon receipt of all necessary regulatory approvals, confirmation that the MEG shareholder rights plan will not adversely affect the Offer, no material adverse effect at MEG, and other customary conditions. The Offer will not be subject to any financing conditions, and the cash component of the Offer will be financed through Husky's existing cash resources.

Copies of the Offer, once filed, will be available upon request made to Husky's Senior Vice President, General Counsel & Secretary at 707 8th Avenue S.W. Calgary, Alberta, T2P 1H5, or telephone 403-298-6111.

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

New service from OilVoice
Trip Shepherd is for companies who need to track their staff in areas of risk.
It's free to use, so we invite you to try it.

AcquisitionHusky EnergyMEG EnergyCash

More items from oilvoice

Cyber Security Experts Unite to Protect Europe’s Critical Industries

CS4CA Summit Returns to London this October Staying abreast of fast-paced industry developments is crucial for cyber security professionals. And while one can learn a lot from publications and social media, it's hard to beat the value of insights gained first-hand from peers. This is why 150+ IT ...

OilVoice Press - OilVoice

Posted 8 months agoPress > cybereurope

Africa E&P Summit

The organisers of the Africa E&P Summit are bringing together Africa's leading exploration companies and governments, just one of the many reasons why you should be attending frontier's event that they are organising and hosting in London at the IET: Savoy Place, 22-23 May. Over 200 key senior exec ...

OilVoice Press - OilVoice

Posted 1 year agoPress > Africasummitoil summit +2

Equinor Deepens in Offshore Wind in Poland

Equinor has exercised an option to acquire a 50 % interest in the offshore wind development project Bałtyk I in Poland from Polenergia. This transaction is a follow-up of the agreement between the two companies which came into force in May 2018 , by which Equinor acquired a 50 % inter ...

OilVoice Press - OilVoice

Posted 1 year agoPress > EquinorEquinor EnergyPoland +2

Nigeria has highest capex on crude and natural gas projects in sub-Saharan Africa Over Next Seven Years, says GlobalData

Nigeria accounts for more than 34% of the proposed capital expenditure (capex) on planned and announced crude and natural gas projects in the sub-Saharan Africa over the period 2018–2025, according to GlobalData , a leading data and analytics company. The company's report: ‘H2 2018 Production ...

OilVoice Press - OilVoice

Posted 1 year agoOpinion > GlobalDataNigeriaCrude +5

CNOOC Signs Strategic Cooperation Agreements with 9 International Oil Companies

HONG KONG, Dec. 18, 2018 /PRNewswire/ -- CNOOC Limited (the "Company", SEHK: 00883, NYSE: CEO, TSX: CNU) announced today that its parent company, China National Offshore Oil Corporation (CNOOC), has signed Strategic Cooperation Agreements with 9 international oil companies including: Chevron, Conoco ...

OilVoice Press - OilVoice

Posted 1 year agoPress > CNOOCChina National Offshore Oil CorporationChevron +11
All posts from oilvoice