Suncor Energy Inc said on Monday it will buy rival Petro-Canada to create Canadas 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 ($14.9 billion) for Petro-Canada in an all-share deal.
That makes it the largest Canadian oil and gas take-over ever, according to Thomson Reuters data, and the biggest take-over of a Canadian company since 2007, when Rio Tinto bought aluminium company 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 worlds biggest oil reserves outside the Middle East.
The merger of the two 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 per 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 shares, which had been trading at 2003 levels.