Year of the Big Deal

Robert Lehodey, QC

Jan 2, 2010

By Shaun Polczer, Calgary Herald

It was the year of the megadeal.

Despite fewer overall transactions, merger and acquisitions in 2009 were dominated by a handful of superdeals that reshaped the oilpatch landscape for the decade to come as familiar faces fell by the wayside, to be replaced by some new players sure to become household names.

The wheeling and dealing began in earnest in March with the $40-billion white wedding of Suncor Energy and Petro-Canada, the largest corporate hookup in Canadian history. It ended in December with the $40-billion breakup of EnCana into two separate pure plays: the heavy oil-loaded Cenovus Energy and the new unconventional gas giant EnCana, each $20-billion companies in their own right.

Those two deals are expected to fuel another wave of buying and selling in 2010 as they shed non-core assets and consolidate operations, says Robert Lehodey, who runs a merger and acquisition practice with Osler, Hoskin & Harcourt in Calgary.

"It (2009) was a pretty interesting year," he said in an interview. "We know both EnCana and Suncor are going to sell off stuff ; that'll give a lot of opportunities for smaller companies that can go out and get funding to buy."

But overall, the tone and tempo of activity through the previous 365 days was contradictory and sporadic.

After falling in January and February, oil prices recovered throughout the year even as natural gas continued to lag. Continued uncertainty in financial markets combined with myriad rule changes and government policies with respect to royalties convinced some companies to sell, despite a lack of enthusiastic buyers.

"There wasn't a market dynamic through the last half of 2009 where you had a whole bunch of buyers and people looking to sell," Lehodey says.

"There isn't much of a dynamic when everybody is looking to sell. We seem to be recovering on the oil side, haven't really recovered on the gas side."