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The deal makes Cenovus an integrated producer with refineries in Canada and the United States, adding to their existing half-ownerships in two U.S. refineries.
Refineries have suffered during the pandemic as travel restrictions hammered demand for jet fuel and gasoline, but in more normal times they can provide a hedge for oil producers when crude prices are low.
“The diverse portfolio will enable us to deliver stable cash flow through price cycles…,” Alex Pourbaix, Cenovus President and Chief Executive Officer said.
After the deal closes, Cenvous shareholders would own 61 per cent of the combined entity, with Husky shareholders controlling the rest. Hong Kong tycoon Li Ka-shing-controlled Hutchison Whampoa would hold a 15.7 per cent stake in new compnay. Hutchison Whampoa is the biggest shareholder of Husky currently, with 40.2 per cent stake.
Cenovus’ deal for Husky is valued at $23.6 billion, including debt, the companies said in a joint statement.
Cenovus said the deal would create Canada’s third-largest producer based on total company output behind Canadian Natural Resources Ltd and Suncor Energy Ltd.
Husky shareholders will receive 0.7845 of a Cenovus share and 0.0651 of a Cenovus share purchase warrant in exchange for each Husky common share, according to the statement. Husky’s market value stood at $3.2 billion as of Friday’s close, which implies Cenovus is offering a 19.5 per cent premium through the all-stock deal.