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North American M&A still far off: Suncor

24 Feb 2016 13:32 GMT
North American M&A still far off: Suncor

Houston, 24 February (Argus) — Mergers and acquisitions in the US, and more widely North America, are far away from taking off because the price spreads are still wide, chief executive of Suncor Steve Williams said.

The Canadian integrated oil company finally secured support from the board of Canadian Oil Sands (COS) in January for its proposed takeover after protracted negotiations since October last year.

"It will be a long time before we see managements say it makes sense to be part of another company," Williams told Argus on the sidelines of the IHS CeraWeek conference in Houston. "Even our deal, it made so much sense, and we yet had to go through so many rounds of negotiations."

He said he expects a couple of deals to go through, like the one his company has just secured, but it is "not clear" if there will be a step in M&As because expectations between "buyers and sellers remain wide."

But as producers with worsening balance sheets hold off from looking at M&As as an option, many of them "will go to the wall," he said, amid the prolonged oil market weakness that has seen prices plunge to near 13-year lows.

Williams expects oil prices to start to recover toward the end of this year as demand and supply balance out, but he declined to give a specific price forecast.

Suncor clinched the deal after raised its offer to 28pc of a Suncor share for each share of COS, up from 25pc. Based on Suncor's share price on 15 January, the new offer amounts to C$8.74/COS share ($5.37/share), or around C$4.2bn if all COS shares are tendered. Suncor will assume COS' estimated C$2.4bn of debt, taking the deal value to C$6.6bn.

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