Suncor buys PetroCan for $18B

OTTAWA – Suncor Energy is in advanced talks to acquire Petro-Canada in a stock-based deal worth $18 billion, people familiar with the talks said yesterday.

If successful, the merger would combine two of the largest operators in the Canadian oil sands, which have high production costs and have become a target of environmental groups. The deal could be announced as early as today.

Like many in the energy business, both companies have had to deal with falling prices and sagging demand for their oil.

The end of Petro-Canada as an independent company would eliminate the last vestige of an ambitious and highly controversial program, begun by prime minister Pierre Elliott Trudeau during the 1970s to assert Canadian control over the country's energy resources.

The $18 billion price would represent about a 30 per cent premium for Petro-Canada, which operates conventional and oil sands production sites, refineries and a nationwide chain of service stations.

A Petro-Canada spokesperson declined to comment. "I'm afraid we don't speculate on rumours," Victoria Barrington told the Star.

Suncor did not return calls.

A takeover of Petro-Canada, a former federal Crown corporation, could be tricky because of legislation barring any one investor from owning more than 20 per cent of the company.

The Petro-Canada Public Participation Act also forbids the company from "selling, transferring or otherwise disposing of all or substantially all of its assets in one transaction, or several related transactions, to any one person or group of associated persons, or to non-residents, other than by way of security only in connection with the financing of Petro-Canada,"

In a securities filing last month, the Ontario Teachers' Pension Plan, which owns about 3.3 per cent of the company, said it had "held discussions with the management and board of Petro-Canada regarding the creation of shareholder value. Other investors have called on the firm to narrow its focus.