Deals: There Will Be Oil … in Calgary, Anyway

In our M&A Roundup for the week ended March 29, Suncor's $18.39-billion purchase of Petro-Canada tops the sale of Calgary-based Oilexco's North Sea assets. Deloitte, Time Warner also do some buying.

The oil industry’s version of the Calgary stampede drove up the value of North American dealmaking last week.

Far and away the biggest transaction was Suncor Energy Inc.’s $18.39-billion purchase of crosstown oil-and-gas operator Petro-Canada. While the next-largest deal was one-third that size, Premier Oil Plc’s deal to by Oilexco Inc.’s North Sea business for $505-million weighed in as the only other acquisition worth more than $350 million. Suncor, Petro-Canada, and Oilexco are all based in Calgary.

The Canadian Press newspaper calculated that the Suncor-Petro-Canada merger would create a Canadian energy giant sizable enough to compete with such behemoths as ExxonMobil Corp. in North American. The newspaper said that the combined company would have a market capitalization of $43.3 billion, making it the largest energy company in Canada and fifth-largest on the continent. Suncor has about 6,500 employees globally, and Petro-Can about 6,000.

Still, some middle-market acquisitions in the entertainment area spiced up the M&A week, which was speckled also with smaller financial and IT combinations. Blank-check company Victory Acquisition Corp. agreed to acquire TouchTunes Music Corp., a private interactive entertainment company for $318 million, while Time Warner Inc. is buying 30.6-perecent of TV broadcaster Central European Media Enterprises Ltd. And Deloitte is purchasing some businesses of business-process-outsourcing company BearingPoint for $350 million. 

The total value of all 17 North American deals struck in the week was $19.29 billion, up sharply from $4.89 billion in the prior week, when 26 transactions were recorded, according to data provided to CFO.com by mergermarket.

The year-to-date dealmaking totals have now hit 500. And while in numbers that is less than half the 1,066 acquistions as of this time in 2008, the value of transactions is sharply higher — $223.41 billion, compared to $138.15 billion. That quirk is due to a spate of blockbuster deals so far in 2009, led by Merck’s $43.2-billion purchase of Schering-Plough.

Suncor Energy Inc. to buy Petro-Canada for $18.39 billion

Calgary, Canada-based oil and gas company Petro-Canada agreed to be acquired by crosstown Calgary energy company Suncor, which does business focused on development of Canada’s Athabasca oil, and production of renewable energy. Both boards approved the merger, in which 1.28 shares of the combined company will be exchanged for each Petro-Canada share, with Suncor holders receiving one share. The $32.37-a-share equivalent price offers a premium of 34.8 percent, and the implied equity value of the deal is about $15.69 billion. The combined company will operate under the Suncor name after completion, which is expected in the third quarter.
Seller financial advisor: Deutsche Bank; RBC Capital Markets
Bidder financial advisor: CIBC World Markets; Morgan Stanley
Seller legal advisor: Macleod Dixon; Torys
Bidder legal advisor: Blake, Cassels & Graydon; Shearman & Sterling

Premier Oil Plc to buy Oilexco North Sea Ltd. from Oilexco Inc. for $505 million

London-based Premier Oil, an oil and exploration company, agreed to acquire the Aberdeen, UK-based Oilexco North Sea unit of Calgary-based Oilexco for cash in deal financed through a right issue of $242.56 million of credit facilities and existing cash resources. The credit facility includes an acquisition bridge loan of $175 million for 18 months, a revolving credit facility of $225 million for three years, and letters of credit of $63 million for three years each. Completion is expected in May.
Seller financial advisor: Morgan Stanley
Bidder financial advisor: Deutsche Bank; Oriel Securities
Seller legal advisor: Not Available
Bidder legal advisor: Blake, Cassels & Graydon; Slaughter and May

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