Husky Energy launches takeover offer for MEG Energy

Husky Energy Inc has announced a proposal to acquire all of the outstanding shares of MEG Energy Corp.for implied total equity consideration of approximately CAD3.3 billion (US$2.55 billion). This proposal values MEG at an implied total enterprise value of CAD6.4 billion (US$4.94 billion), including the assumption of approximately CAD3.1 billion (US$2.39 billion) of net debt.

MEG is a Canadian oil sands company focused on sustainable in situ development and production in the southern Athabasca oil sands region of Alberta, a province in western Canada. Husky Energy also operates in western Canada, in thermal production, downstream and resource plays.

Husky is proposing to create a new Canadian energy company through the proposed acquisition, headquartered in Calgary, Alberta. The combined company would 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).

Under the terms of Husky’s proposal, each MEG shareholder will have the option to choose to receive consideration per MEG share of CAD11 (US$8.5) in cash or 0.485 of a Husky share, subject to maximum aggregate cash consideration of CAD1 billion (US$771.5 million) 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 CAD22.68 (US$17.50) as of 28 September 2018, the last trading day prior to the proposal, implying a mix of CAD3.21 (US$2.48) 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% premium to the 10-day volume-weighted average MEG share price of CAD7.62 (US$5.89) as of 28 September 2018 and a 37% premium to MEG’s closing price of CAD8.03 (US$6.20) as of that date.

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