| |||||||||||||||||||||||
| |||||||||||||||||||||||
One of the biggest deal stories in North America Wednesday isn't a deal story at all, and won't receive a lot of airtime.
On Wednesday, Calgary, Alberta-based Suncor Energy Inc. said its board has approved a C$20.6 billion ($20.6 billion) investment aimed at boosting crude oil production by 200,000 barrels a day at its oil sands operation in northern Alberta. The company also said it had approved a C$7.5 billion capital spending plan for 2008.
This is pure investment rather than M&A, but it is a key part of a story that will continue to drive a wave of takeovers across the continent, thousands of miles geographically and sectorally from the oil patch.
The Alberta tar sands contain an estimated 175 billion barrels of oil, second only to Saudi Arabia. The problem is the oil is trapped in filthy muck, which makes it expensive to extract and means the project has a Godzilla-esque ecological footprint. But rising oil prices have made the oil sands project economically viable, which explains Suncor's $20 billion investment.
Certainly the oil sands project is creating deals on its own, such as the agreement by Calgary oil explorer Penn West Energy Trust to buy Canetic Resources Trust for C$4.9 billion in October. But beyond that, the oil sands project is one of the main reasons that the Canadian dollar has risen 50% in the past five years so it is now on par with the greenback.
That means Canadian companies are becoming more acquisitive internationally, given the new found strength of its acquisition currency. That is why Toronto-Dominion Bank can buy Commerce Bancorp of New Jersey for $8.5 billion, and why Yamana Gold Inc. of Toronto could buy Reno, Nevada-based Meridian Gold Inc. for C$3.5 billion.
The power of the oil sector is creating a further dynamic that could create deal opportunities. Sectors that don't take minerals or fuel from the ground are feeling the pinch of the strong currency, and these companies may have to merge or sell out. Manufacturing, in particular, is having a rough time and may be looking for partners. - Peter Moreira
See story from The Globe and Mail See TheDeal.com story on Penn West-Canetic See TheDeal.com story on Commerce-TD See TheDeal.com story on Yamana Gold-Meridian
Categories Deal Video
    Community
 Elsewhere on The Deal.comDealwatch
The Deal MagazineCorporate Dealmaker
The Deal VideoCategories
Blog roll
Archives
| |||||||||||||||||||||||
|
|
|
|
|
