Husky Energy (OTCPK:HUSKF -5.6%) CEO Rob Peabody says his company’s hostile C$6.4B bid for MEG Energy (OTCPK:MEGEF +38%) reflects the need for Canadian oil companies to own integrated assets from production to refineries in order to manage the deep price discounts on Canadian crude.
Husky’s bid for highly indebted MEG is a bet that MEG’s production assets will be lucrative once price differentials return to normal, but analysts say some investors own Husky shares for its low exposure to heavy oil differentials and may be disappointed by a bid that increases such risks.
MEG potentially could find another suitor with a more attractive offer, says Eight Capital analyst Phil Skolnick, adding that Imperial Oil (IMO +3.1%) and Suncor Energy (SU +1.9%) are potential bidders.
Peabody says Husky will begin to meet soon with MEG shareholders about the deal but would welcome talks with MEG’s board.
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