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Aug 19, 2019

Husky Energy is a prime candidate to go private: RBC analyst

Husky Energy may need to privatize, RBC analyst says


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With its shares trading near the lowest level in more than 15 years, Husky Energy Inc. (HSE.TO) is a prime candidate to be taken private, according to RBC Capital Markets analyst Greg Pardy.

“If ever there was a time for Husky to consider going private, we believe it is now,” Pardy said in a report to clients Monday.

Husky Energy is well-suited to exit the public spotlight, Pardy noted, since it’s already quasi-private as a result of Hong Kong billionaire Li Ka-Shing’s business empire controlling 69.5 per cent of the company. The remaining 30.5 per cent of the company was valued at $2.7 billion, based on Friday’s closing price of $8.77 per share.

Pardy said going private is the best way to capture the gap between Husky’s current share price and its net asset value, which RBC estimates at about $19.53 per share.

Becoming a private company would also let Husky become more nimble and give it the “flexibility to differentiate its strategic direction and tactics as need be without public market scrutiny,” said Pardy, who also cautioned that going private is no panacea for Husky since it would lose the ability to raise money via public offering, which could impair its ability to pursue mergers and potential acquisitions.

Nonetheless, low energy prices and a lack of investor interest have dragged the Canadian energy sector lower, and Husky’s lack of solid free cash flow has put it at a disadvantage compared to its oil sands peers, according to Pardy.

“The beauty contest for energy producers these days revolves around free cash flow generation and distributions to shareholders … Admittedly, Husky is not a great fit in this world,” he said.