CANADIAN OIL

Mega $43.3 billion merger

03-24-2009 | AFP

“This will create a made-in-Canada energy leader with the assets, cost structure and financial strength to compete globally”..

Panama Star The companies released a joint statement early Monday announcing the details of an all-stock deal that will see the companies form an entity with a combined market capitalization of $43.3-billion. The new corporation would continue to operate and trade under the Suncor name.

"This merger creates a made-in-Canada energy leader with the assets, cost structure and financial strength to compete globally," said Rick George, Suncor's current chief executive and prospective head of the joint venture.

The deal would create a new champion in the Canadian oil patch and unite two of the biggest players in the oil sands of northern Alberta, provided that the companies can stickhandle their way around federal legislation that was once thought to make Petro-Canada immune to a takeover. Under the Petro-Canada Public Participation Act, no person or company can own or control more than 20 per cent of the company's voting shares and the head office must remain in Calgary.

'This merger creates a made-in-Canada energy leader with the assets, cost structure and financial strength to compete globally,' said Rick George, Suncor's current chief executive and prospective head of the joint venture. '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.'

According to the companies, Petro-Canada shareholders are to receive 1.28 shares of the merged company for every Petro-Canada share they hold, while Suncor stockholders would receive a share in the new venture for each Suncor share they own. The companies say the deal represents a 25 per cent premium on the 30-day weighted average of Petro-Canada shares.

The deal values Petro-Canada at $19.18 billion based on Friday's closing prices on the Toronto Stock Exchange.

Existing Suncor shareholders would hold 60 per cent of the new company, while Petro-Canada shareholders would hold 40 per cent. Petro-Canada has been under increasing pressure from shareholders unhappy with its performance and with the ballooning costs.