On September 30, 2018, Husky Energy announced its intention to acquire MEG Energy in a cash-and-stock offer, comprised of a C$3.3 billion equity stake and the assumption of C$3.1 billion in debt. All in, the deal carries an enterprise value of C$6.4 billion. Analysts have commented that the move could trigger a bidding war, with CNRL, Imperial Oil, and Suncor noted as alternative buyers.
Both Alberta companies are linked to prominent Asian investors. Li Ka-Shing, Hong Kong’s richest man, controls roughly 70% of Husky via a Hong Kong-based conglomerate. Although Li stepped away from active management of his business interests in May, he continues to sit as a senior advisor. Husky’s takeover bid, if successful, would vastly boost its internal production capacity and create Alberta’s fifth-largest oil sands producer (CBC News, 2018). Further, the bid speaks to a greater trend of consolidation within Alberta’s oil sands, whereby market conditions have motivated large companies to increase operational scale.
China’s CNOOC, a massive state-owned enterprise (SOE), is the largest shareholder in MEG energy, having initially purchased a 16.69% stake in 2005 (this has since dropped to roughly 12%). CNOOC’s Alberta operations also include Nexen, which it purchased in 2012 for C$15.1 billion. CNOOC has not yet commented on the proposal, although Husky CEO Rob Peabody stated that he expects the company to find it “compelling.”