Victor Li pushes Husky Energy into US$18 billion merger with rival Canadian oil producer to help end losses from oil slump
- Husky Energy to combine with rival oil and gas producer Cenovus to create Canada’s third-largest player to help save cost, end losses
- CK Hutchison will sell its 40.19 per cent stake in Husky for a 15.7 per cent interest in the merged entity, according to a joint announcement
CK Hutchison is backing an all-stock C$23.6 billion (US$18 billion) merger between its unit Husky Energy and Cenovus Energy as the Canadian oil and gas producers seek to end a trail of losses from a slump in global oil prices.
The Hong Kong unit, run by Victor Li Tzar-kuoi, will sell its 40.19 per cent interest in Husky to Cenovus in return for a 15.7 per cent equity stake in the combined entity, according to a joint announcement on late Sunday. Husky shareholders will receive 0.7845 of a Cenovus share, plus 0.0651 of a Cenovus share purchase warrant.
The combination will create Canada’s third-largest oil and gas producer with a capacity to produce 750,000 barrels of oil equivalent per day and generate annual synergies of C$1.2 billion. It will also produce free funds flow break even with West Texas Intermediate benchmark at US$36 per barrel in 2021, and at less than US33 per barrel by 2023, the companies added.
“The merged company will be stronger and better,” a person familiar with the deal said, adding that no equity accounting will be required as its stake drops below 20 per cent. “CK Hutchison will have less earnings exposure to low oil prices, but will have much greater value if oil prices rise.”
