Cenovus to reduce combined workforce with Husky Energy by up to 25% after merger

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The $ 3.8 billion merger between Cenovus Energy and Husky Energy will result in a 25% workforce reduction, CBC News confirmed.”The reductions are estimated to be about 20 to 25 percent of the combined workforce, or about 8,600 employees and contractors,” Reg Curren, senior media advisor for Cenovus, said Tuesday in an email to CBC. News. two days after the announcement of the merger.

The majority of job cuts of 1,720 to 2,150 jobs are expected to take place in Calgary, where both companies are headquartered.

The new company will operate under the name Cenovus Energy and will be based in Calgary.

“As with any merger of this type, there will be some overlap and tough decisions as we work to create a combined organization that is better positioned for the future,” said Kim Guttormson, communications manager at Husky, in a statement sent. by e-mail.

Cenovus CEO Alex Pourbaix said his company’s merger with rival Husky would create a new entity that is stronger, more resilient, and operates with “significantly reduced” risk for market volatility. (Jeff McIntosh / The Canadian Press)

Cenovus CEO Alex Pourbaix said the merger would create a new entity that is stronger, more resilient, and operates with “significantly reduced” risk of market volatility.

His Husky counterpart, CEO Rob Peabody, said the deal would allow the merged companies “to perform better in a more difficult environment.”

Husky Energy chairman and chief executive Robert Peabody said the two companies had been talking about a merger for several years, but discussions resumed in March. (Jeff McIntosh / The Canadian Press)

Analysts have generally applauded the surprise Cenovus-Husky hookup for its operational benefits, but criticized Husky’s premium of more than 20 percent of the price.

“The deal makes strategic sense,” Credit Suisse’s Manav Gupta said in a note to investors.

“Like US E&P (exploration and production companies), Canadian energy companies also need to regroup, reduce costs and become leaner to better adapt to declining energy demand by [a] post-pandemic world. ”

The two companies have relatively large debt, which is why joining forces made financial sense.

While oil has struggled for many years, this deal comes at a remarkably unique time in the industry, with many companies bleeding money with historically low oil prices that even turned negative this year.

The pipeline and tank storage facilities at the Husky Energy Oil Terminal in Hardisty, Alberta. The Husky CEO said the merged company would be better able to meet climate goals, such as the goal of having net zero emissions by 2050. (Larry MacDougal / The Canadian Press)

Cenovus shares fell 15% to $ 4.15 on Monday in Toronto before closing 8.4% at $ 4.47.

Husky, meanwhile, gained as much as 14.2% to $ 3.62 before closing 12% at $ 3.55.

Earlier in 2020, Cenovus and Husky shares had lost 63% and 70% of their value, respectively.

Cenovus expects to achieve savings of $ 1.2 billion.

According to a veteran oil sands analyst, the all-equity deal is likely to trigger more mega-mergers between Canadian oil and gas majors.

“This is probably just the start of big deals in the Canadian energy sector, so it begs the question of who’s next? Eight Capital analyst Phil Skolnick said in a report on Monday.

“As we have seen in the United States with the acceleration of mergers and acquisitions, when there is a significant transaction, there are probably more to come. ”

Several industry observers point to Calgary-based oil sands producer MEG Energy Inc. as the main potential target, noting the failure of Husky’s $ 3.3 billion hostile takeover attempt over its smaller rival two years ago.

The Husky-Cenovus merger provides that Husky shareholders will receive 0.7845 Cenovus shares plus 0.0651 Cenovus share purchase warrants in exchange for each Husky common share if the transaction is completed.

Cenovus shareholders would own approximately 61 percent of the combined company and Husky shareholders approximately 39 percent.

The deal must be approved by at least two-thirds of Husky’s shareholders, but Hong Kong billionaire Li Ka-Shing controls 70 percent of Husky’s shares and has agreed to vote in favor of the deal.

The announcement came on Sunday as Calgary oil sands companies are set to begin releasing their third quarter financial results, with Suncor Energy Inc. due to report on Wednesday and Cenovus and Husky to report on Thursday.

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