Cenovus Energy has agreed to buy Athabasca Oil for C$12.00 a share, mostly in cash, in a deal valuing the oil sands producer at C$5.7bn including debt.
Cenovus Energy (TSX: CVE) has agreed to buy Athabasca Oil (TSX: ATH) for C$12.00 a share, an implied enterprise value of C$5.7bn. Cenovus announced the definitive agreement before the Toronto open today. Athabasca’s thermal oil sands assets would sit next to Cenovus’s own Christina Lake, May River and Thornbury operations. The deal adds about 45 MBOE/d of production and a reserves life of more than 75 years on a proved plus probable basis.
Neither stock has traded on the news yet. Athabasca closed Friday at C$10.58, up 1.83%, which puts the offer about 13% above that level. Cenovus closed Friday at C$46.25, up 2.78%. Toronto opens at 2.30pm UK time.
Athabasca shareholders can elect C$12.00 in cash, 0.264 of a Cenovus share for each Athabasca share, or a mix. Anyone who makes no valid election receives cash. Elections are pro-rated, meaning scaled back when requests exceed the caps: cash is limited to C$4.3bn (75% of the total) and Cenovus shares to 44.4m (35%). At Friday’s close, 0.264 of a Cenovus share is worth about C$12.21, slightly more than the cash offer.
The cash comes from cash on hand and short-term borrowings, with no financing contingency. Cenovus guides year-end pro forma net debt (as if the deal had completed) of C$5.0bn to C$5.5bn, against an unchanged C$4bn target and about C$3.0bn at the third quarter. It expects synergies of about C$85m a year and a path to 115,000 barrels a day of thermal production by 2032.
Jon McKenzie, President and CEO of Cenovus Energy, said:
This transaction strengthens our position in one of the world’s premier oil-producing regions and is a natural extension of our oil sands strategy.
Jon McKenzie, Cenovus Energy
Both boards approved the deal unanimously, and Athabasca directors and officers, who hold about 2.2% of the shares, have signed support agreements. Completion is targeted for December, subject to regulatory approvals and an Athabasca shareholder vote.
