Monthly M&A Insider - Mergermarket

The Potential Impact of the Energy, Mining
& Utilities Sector
• In March 2009, a mega deal was announced in the
Energy, Mining & Utilities sector with Suncor Energy
agreeing to buy Petro-Canada for approximately $18.39bn.
The companies have operations in the oil sands of
Canada, which have the largest oil reserves outside the
Middle East. The transaction has been championed as a
smart deal, since Suncor is making a buy at a time when
crude prices for May delivery are trading at $53 a barrel,
a decrease from last year’s peak of $147. In addition, a
share-swap deal is ideal as countries around the world are
dealing with a credit crunch. Suncor’s purchase of Petro-
Canada stands in contrast to other takeouts of Canadian
companies operating in the Energy, Mining & Utilities
sector. The acquisition by Xstrata Plc of Falconbridge
Ltd, the listed Canada based producer of zinc, nickel and
copper, for $23.66bn at the height of the commodities
bubble in 2006, and the purchase by Rio Tinto Plc of
Alcan, the listed Canada based producer and supplier of
aluminum sheet, foil, wire and cable, and extrusions, in
2007 for $43.72bn have been classified by some industry
insiders as inflated.
North America
• Taking into consideration the great production potential
of the region, a question arises whether any other deals
equivalent in size, or even greater, than the Suncor
Energy and Petro-Canada transaction are possible in
Canada in the Energy, Mining & Utilities sector during
2009. Total E&P Canada Ltd. has expressed interest in
the listed Canada based energy company UTS Energy
Corporation. However, the company has commenced
an auction process after it rejected Total E&P Canada’s
C$617m ($504.3m) bid in January 2009 citing it as
inadequate. With a market cap of $176m, OPTI Canada,
the listed Canada based oil sands development company,
has been named as another potential takeout target.
Athabasca Oil Sands Corp, the Calgary-based oil sands
junior, has also been identified as a company that may
draw interest from one of the ten largest Exploration and
Production (E&P) companies in the world. The company
has an attractive networking interest in about 1.3m acres,
along with three other major areas in northern Alberta. It
will be interesting to see whether BP plc, Imperial Oil and
ExxonMobil, who have all shown some interest in the oil
sands sector, will find attractive targets among Energy,
Mining & Utilities companies operating in Canada.
Monthly M&A report – 13