Cenovus to buy Husky Energy in $2.9B stock deal

• Cenovus Energy (NYSE:CVE) agrees to acquire Husky Energy (OTCPK:HUSKF) in an all-stock transaction, creating an integrated Canadian oil and natural gas company that's expected to boost free funds flow generation.
• Combined company will have about 750K boe/d production, making it the third-largest Canadian oil and natural gas producer. It will be the second-largest Canadian-based refiner and upgrader with total North American upgrading and refining capacity of ~660K boe/d.
• The aggregate consideration for Husky shareholders implies a transaction equity value for Husky of ~C$3.8B (US$2.9B) and a transaction enterprise value for Husky of ~C$10.2B.
• Husky shareholders to get 0.7845 of a Cenovus share plus 0.0651 of a Cenovus share purchase warrant in exchange for each Husky common share; represents a 21% premium, excluding warrants, relative to Husky’s five-day volume-weighted average price per share as at Oct. 23, 2020.
• Expects to generate incremental C$1.2B of annual free funds flow, comprised of C$600M in annual corporate and operating synergies and C$600M in annual capital allocation synergies within the first year.
• The combined company is expected to be free funds flow breakeven in 2021 at WTI prices of US$36/bbl, with a line of sight to reducing its free funds flow breakeven to less than WTI US$33/bbl by 2023.
• Anticipates quarterly dividend of C$0.0175 per share upon board approval.
• Immediately following the close of the transaction, Hutchison Whampoa Europe Investments S.à r.l. and L.F. Investments S.à r.l. will respectively hold ~15.7% and ~11.5% of the combined company; the two firms have also entered into separate standstill agreements with Cenovus.
• The transaction is expected to close in Q1 2021.
• Conference call at 1:00 PM ET.
• See Cenovus and Husky's levered free cash flow since 2016: