24 January 2019, News Wires — When the final numbers were tallied late last Wednesday for Husky Energy’s hostile bid for rival Canadian oil producer MEG Energy, Husky’s top executives learned they had the support of nearly 60 percent of MEG shareholders, people familiar with the situation told Reuters.
That meant they easily surpassed the 50 percent threshold usually needed to extend their offer and reach the two-thirds mark necessary to win the deal.
On Thursday morning, however, Husky walked away, saying it had “insufficient” support. The move shocked investors, analysts and MEG itself.
It is usually a given that a company securing such significant backing would extend its bid, buying extra time to drum up remaining support.
However, Husky in a statement on Thursday noted two negative developments since it made the offer in September – a lack of progress expanding pipelines in western Canada, and the province of Alberta’s decision to order production cuts to drain a glut of oil in storage. The company has nothing further to add, spokesman Mel Duvall said on Tuesday.
In fact, the deal began losing its financial appeal shortly after Husky made the offer, people close to Husky said. By last Wednesday, it seemed to one of the people as if Husky was hoping the bid would fail.
“The economics of the transaction changed very materially since they launched the bid. It was an extremely shrewd move by Husky to launch the hostile (offer) and just as smart to let it go,” said an energy M&A lawyer, who declined to be identified because of his ties to both companies.