Suncor Energy Inc is in advanced talks to acquire rival Petro-Canada for about $15 billion in shares, the Wall Street Journal reported yesterday, without quoting any sources. If Suncor does buy its rival, the deal would create Canada’s biggest energy company with a market value of $35 billion, surpassing the market value of EnCana Corp, the current leader.
Suncor, the Canadian number 2 oil exploration and refining firm, is offering a 30% premium to Petro-Canada’s shares. The company’s New York-listed stock closed on Friday at $24.01.
The WSJ said an agreement could be announced today, though there is still a chance the talks could collapse.
Any agreement to acquire Petro-Canada, the number 4 Canadian refiner, would require the approval of the Canadian government because of legislation preventing anyone from holding more than 20 percent of the former state-owned firm.
A merger of the two companies would combine Petro-Canada’s extensive retail gasoline and refining business and its international operations with Suncor’s extensive operations in the oil sands, where it is the number 2 producer behind Syncrude Canada Ltd.
Petro-Canada delayed its Fort Hills oil sands project last year because of rising costs. Petro-Canada has also faced pressure to boost the value of its shares, which have lagged rivals because the company’s management has failed to boost production and the firm’s repeated failures to meet earnings targets. Its shares have dropped 31% over the past 12 months while Suncor stock is down 35%.