Suncor to buy Petro-Canada for $15 billion
By Scott Haggett
CALGARY, Alberta (Reuters) - Suncor Energy Inc said on Monday it will buy rival Petro-Canada to create Canada's biggest oil company, dominant in the Alberta oil sands and able to slash costs as it looks to weather a period of low oil prices.
Suncor is offering C$18.43 billion ($15.1 billion) for Petro-Canada in an all-share deal. That makes it the largest Canadian oil and gas takeover ever, according to Thomson Reuters data, and the biggest takeover of a Canadian company since 2007, when Rio Tinto bought aluminum producer Alcan for $43 billion.
The deal targets C$1.3 billion in annual savings for the combined company in an environment in which plummeting oil prices have made it hard to turn a profit from squeezing crude out of the oil sands in northern Alberta, the world's biggest reserves outside the Middle East.
The merger will create a company with 100 years worth of reserves, four refineries in Canada and the United States, a chain of retail gasoline stations and more than 680,000 barrels a day of oil and gas production.
"We now have a new integrated national champion," said Dom Grestoni, managing partner at IG Investment Management, which holds about 6 million Petro-Canada shares and 11 million Suncor shares.
The deal comes after a period of missed earnings targets and project delays at Petro-Canada, which has been under pressure from shareholders to boost its lagging share price, which had been trading at 2003 levels.
Suncor will be able to use its new heft to further cut costs at its oil sands operations, adding Petro-Canada's oil sands properties -- including the planned Fort Hills project -- and keep growing despite low oil prices.
"We had two options," Rick George, Suncor's chief executive, said on a conference call. "We could pull back ... or do something that would really strengthen our position and allow us to take a look at investing and coming out of this cycle even stronger than ever." Continued...