Oct 26, 2020
The Daily Chase: Cenovus buying Husky in blockbuster all-stock deal
By Noah Zivitz
Cenovus Energy is buying Husky Energy for $3.8 billion in a blockbuster all-stock transaction that jolted our weekend and very much looks like a play on diversifying for better position in an industry awash in uncertainty. The deal doubles Cenovus’s pipeline capacity in Alberta and will take its upgrading and refining capacity from 250,000 barrels per day to 660,000. It also opens the door to $1.2 billion in cost savings and means Li Ka Shing’s empire will become a significant shareholder in Cenovus. Today we’ll focus on the motives for the deal, the market reaction, the potential for job cuts and asset sales, and whether more M&A is on the way. In addition to investment industry insight, we’re looking forward to speaking with founding Encana CEO Gwyn Morgan and former TransCanada CEO Hal Kvisle, who no doubt will help explain how Keystone XL’s uncertain future might have factored into the equation.
PANDEMIC WATCH
The weekend brought record numbers of new COVID-19 cases in Ontario and a (likely) majority mandate for John Horgan, as B.C. navigates the virus. In Europe, Italy and Spain have introduced new measures to curb COVID-19’s spread. Meanwhile, it’s just over a week until election day in the United States, where the country is seeing record numbers of cases and the pandemic reached deep into the White House as Vice-President Mike Pence’s chief of staff tested positive.
STELCO FLAGS CYBERATTACK
The Hamilton, Ont.-based steel maker yesterday disclosed an online attack that forced it to temporarily suspend steel production. “Criminal cyberattacks on businesses and other organizations around the world are increasingly prevalent in the 21st century, and Stelco will be cooperating with law enforcement authorities to investigate this crime,” it said. While production has resumed, the tone of Stelco’s release underscores the threat facing Corporate Canada. We’ll chase insight on best practices for companies to protect themselves against cyber vulnerabilities.
OTHER NOTABLE STORIES
-Brookfield Business Partners announced this morning it’s buying full control of Genworth MI Canada in a deal that will see it pay $43.50 per share for the 43 per cent of the mortgage insurer it doesn’t already own.
-A year-old asset sale by Bombardier has been repriced. The Canadian transportation company said today it will now receive US$275 million from Spirit Aerosystems for the aerostructure deal that was originally announced last October. Back then, Bombardier was poised to receive US$500 million. “Performance will be adversely impacted due to COVID-19 for the coming years, but we worked closely with Bombardier on a mutually agreeable price reduction that mitigates this impact,” Spirit CEO Tom Gentile said in a release.
-We’ll keep Chorus Aviation on our radar after its shares surged in late trading Friday subsequent to its announcement about an early-stage approach for a possible takeover.
-Dunkin’ Brands Group disclosed yesterday it “has held preliminary discussions” to be acquired by Inspire Brands.
-Shares of European software maker SAP are collapsing today, falling as much as 21 per cent in Germany after the company cut its revenue forecast.
-The Wall Street Journal is reporting Blackstone has struck an agreement to buy Simply Self Storage from Brookfield Asset Management for US$1.2 billion. The deal is expected to be announced today.
NOTABLE RELEASES/EVENTS
-Notable data: U.S. new home sales
-Notable earnings: West Fraser Timber, MEG Energy, PrairieSky Royalty, Hasbro
-9:00 a.m. ET: Transport Minister Marc Garneau makes announcement in Mirabel, QC about airport funding
-10:15 a.m. ET: Prime Minister Justin Trudeau delivers remarks at Canadian Chamber of Commerce’s annual general meeting
-1:45 p.m. ET: Trudeau holds discussion with Ambassador to U.S. Kirsten Hillman and consuls general in the U.S.
-Three-day Toronto Global Forum begins (notable speakers incl. Rockefeller Foundation President Rajiv Shah Tuesday 1:50)
-Federal by-elections in Toronto-Centre and York Centre
-Provincial election in Saskatchewan
-Huawei CFO Meng Wanzhou due back in Vancouver court for extradition hearing proceedings
Every morning BNN Bloomberg's Managing Editor Noah Zivitz writes a ‘chase note’ to BNN Bloomberg's editorial staff listing the stories and events that will be in the spotlight that day. Have it delivered to your inbox before the trading day begins by heading to www.bnnbloomberg.ca/subscribe.
