Husky Energy Inc expects to secure over 50 percent support from MEG Energy shareholders for Husky’s $3.3 billion unsolicited offer to take over the rival oil producer by Wednesday’s deadline, people familiar with the situation told Reuters.
The numbers may still fall short of the two-thirds threshold required to get the deal across the finish line, the sources said, declining to be named as the details were not public. In that case, Husky plans to extend the deadline to buy more time to receive additional support.
Husky did not respond to a request for comment.
“We have no insight into how many people have tendered or not tendered,” MEG spokesman John Rogers said.
Husky’s offer in September to buy MEG for C$11 in cash per share or 0.485 of a Husky share, expires at 5 p.m. Eastern Time on Wednesday. Husky’s offer includes a condition that at least 66.7 percent of MEG shares must be tendered to the offer for Husky to complete the deal.
The early support for the deal suggests that Husky’s offer for MEG is likely to go through.
The deal reflects Husky’s strategy to double down on heavy oil production, even as clogged pipelines drove down Canadian prices last year. Husky last week put a light oil refinery in British Columbia and chain of gas stations up for sale, deeming them “non-core.”
If Husky succeeds, MEG’s board will likely resign, one of the sources said.
MEG shares have been trading well below the offer price, suggesting that investors did not believe that Husky’s offer will succeed. After the Reuters report, MEG’s stock rose as much as 3.1 percent to hit a six-week high of $8.62.
Hostile takeovers are rare in the Canadian energy sector. Suncor Energy’s hostile bid for Canadian Oil Sands in 2015 met with resistance before the two agreed to a sweetened deal.
Husky has argued that the deal offers a premium to MEG’s share price, gives investors exposure to Husky’s stronger balance sheet and includes the prospect of C$200 million per year in synergies. MEG’s board has stated that the offer undervalues the company and was not in MEG’s best interests.