Cenovus To Buy Husky For $3.8 Billion In All-Stock Deal

Cenovus Energy (TSX:CVE) has agreed to buy Husky Energy (TSX:HSE) in an all-stock deal valued at $3.8 billion.

The combined company is expecting $1.2 billion in cost and capital synergies and will become the third largest Canadian oil and natural gas producer. 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 they currently own, representing a 21% premium excluding warrants.

After the deal, Cenovus will own 61% of the new company, while Husky will hold a 39% stake. Hong Kong billionaire Li Ka-shing’s CK Hutchison Holdings, the main shareholder in Husky Energy, will own about 27% of the new company.

The deal will see the two companies combine in an all-stock transaction valued at $23.6 billion, including debt, according to a written statement. The move is intended to integrate oil and natural gas resources from the two companies and generate superior returns for investors. The deal gives Husky an enterprise value of approximately $10.2 billion.

After the merger, the company will have about $12 billion in net debt and is expected to break even in 2021 at a West Texas Intermediate crude price of $36 U.S. a barrel. It will continue to operate as Cenovus Energy with its headquarters in Calgary, Alberta.

The transaction has been approved by the boards of both companies and is expected to close in the first quarter of 2021.