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Suncor, Petro-Canada to Merge

Deal worth $14 billion

Canadian oil companies Suncor Energy and Petro-Canada on March 23 announced a decision to merge in a transaction worth approximately US$14 billion. The new company will operate and trade under the Suncor name.

The merger is expected to allow the two companies to save 300 million Canadian dollars in annual operating expenditure. Officials said these savings were expected to come from liquidating overlapping operations, streamlining business practices and improved logistics.

"This merger creates a made-in-Canada energy leader with the assets, cost structure and financial strength to compete globally," said Rick George, who is CEO of Suncor and who will assume the same role with the merged company.

Under the merger agreement, Petro-Canada common shareholders will effectively receive 1.28 common shares of the merged company for each common share of Petro-Canada they own and each Suncor common shareholder will receive one common share of the merged company for each common share of Suncor they own. The exchange ratio represents an approximate 25% premium for the Petro-Canada shares. On completion of the proposed transaction, Suncor's existing shareholders will own approximately 60%, and Petro-Canada shareholders will own approximately 40% of the merged company, company officials said.

Ron Brenneman, the CEO of Petro-Canada and who will assume the role of Executive Vice Chairman in the merged company, said the merger will be good for shareholders of both companies because it will provide reduced capital requirements, operating efficiencies and "complementary integration opportunities between upstream and downstream assets. The increased scale provides more stability in volatile markets, plus the financial and organizational capability to successfully take on large-scale projects in the future," Brenneman said.

The merged company will control about 7.5 billion barrels of oil resources and produce approximately 680,000 barrels of crude oil and natural gas per day, the officials said. Its refining capacity will reach 433,000 barrels of oil per day.

Copyright Agence France-Presse, 2009

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