Activist investors push for Canadian energy deals as prices languish

Thu Aug 13, 2015 3:28pm EDT
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By John Tilak

TORONTO (Reuters) - With a sinking oil price driving Canadian energy shares to decade lows, activist hedge funds are pushing hard for companies to look at mergers and acquisitions or asset sales to curb costs and help the funds reduce their own investment losses.

The funds' shift away from a focus on smarter capital deployment, such as dividend payments and share buybacks, comes as a renewed price slide deals another blow to many companies’ financial results and balance sheets.

Activist involvement in the Canadian energy sector has been increasing, with more proxy contests so far this year than in all of 2014, according to proxy solicitation firm Kingsdale Shareholder Services. U.S. hedge funds FrontFour Capital, Orange Capital and Livermore Partners, as well as Toronto-based West Face Capital, have been the most active.

"The activists are more emboldened than ever. They are carrying a bigger stick than they have in the past," said Shane Fildes, head of global energy investment banking at BMO Capital Markets.

To be sure, putting pressure on energy company executives alone won't make buyers appear and get deals done.

The second quarter was the worst in nearly a decade for Canadian energy M&A, according to Thomson Reuters data. But bankers predict a pickup in M&A later this fall or early next year once crude prices finally bottom out.   Continued...