DBRS Comments on Husky Energy’s Decision to Not Proceed with Unsolicited Offer for MEG Energy Corp.

DBRS Limited (DBRS) notes that on January 17, 2019, Husky Energy Inc. (Husky or the Company; rated A (low) with a Stable trend by DBRS) announced that its unsolicited offer for MEG Energy Corp. (MEG) expired on January 16, 2019, and that the minimum tender condition was not met. Due to insufficient MEG Board of Directors (the Board) and shareholder support, Husky has decided not to extend its offer. As background, on September 30, 2018, Husky launched an unsolicited offer to MEG common shareholders by way of a takeover bid that required 66 2/3% of the total fully diluted shares tendered to Husky’s cash and share exchange offer. Husky’s offer had not been endorsed by MEG’s Board. At that time, DBRS did not take any rating action due to the uncertainties regarding the outcome of Husky’s offer for MEG.

DBRS also notes that, according to Husky’s January 17, 2019, announcement, the Company plans to continue to focus on capital discipline and delivery of the five-year plan as set out at the Company’s investor day in May 2018. Earlier this month, Husky also announced the potential divestment of the Company’s retail business and the Prince George Refinery with proceeds to be directed toward enhancing cash returns and accelerating organic growth investments. Because Husky is not proceeding with the offer for MEG, DBRS plans no rating action at the current time.

Notes:
The principal methodologies are Rating Companies in the Oil and Gas and Oilfield Services Industries (August 2018), DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers (April 2018) and DBRS Criteria: Preferred Share and Hybrid Security Criteria for Corporate Issuers (November 2018), which can be found on dbrs.com under Methodologies & Criteria.

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