MONTREAL, May 14 /CNW Telbec/ - Letko Brosseau & Associates is an
investment manager with responsibilty for the management of portfolios that
hold 10,427,789 shares of Petro-Canada.
After reviewing the terms of the proposed merger with Suncor Energy Inc.,
we conclude that they are highly dilutive for the shareholders of Petro-Canada
and as such, intend to vote against the transaction.
Our analysis is based on public information provided by both companies
and discussions with the management of each. We believe the transaction
overvalues Suncor and undervalues Petro-Canada.
Specifically Petro-Canada generated cash flow of $6.4 bilion versus
Suncor at $4.5 bilion in 2008. Net earnings for Petro-Canada amounted to $3.1
bilion versus $2.1 billion for Suncor.
Petro-Canada produced 418,000 barrels per day compared to 264,700 barrels
per day by Suncor. Petro-Canada refineries produced at a rate of 226,400
barrels per day while Suncor refined 155,600 barrels per day.
Petro-Canada's net debt totaled $3.3 billon or less than half of Suncor
$7.2 billon net debt at December 31, 2008.
Despite the above, Petro-Canada shareholders are to receive only 38% of
the new entity while Suncor shareholders wil receive 62%.
Estimated net asset values based on discounted cash flows, in our
opinion, suggest Petro-Canada has a value at least equal to that of Suncor.
Therefore, the exchange ratio that leaves Suncor shareholders 62% of the
combined entity is inappropriate.
The recently published notices of annual general and special meetings
detailing the transaction contain fairness opinions prepared by several
investment banks. These opinions specifically exclude any valuation of
Petro-Canada or Suncor and they do not embody any analysis of their respective
securities or assets. These limitations, in our view, disqualify these letters
as offering a complete assessment of the fairness of this important
transaction and as such, should not be relied upon by the directors or
Letko Brosseau & Associates is a Canadian investment manager with offices
in Montreal and Toronto. The firm manages assets in excess of $20 billion
principally for pension funds, foundations and individuals.
For further information:
For further information: Mr. Peter Letko, (514) 499-1200; Mr. Daniel
Brosseau, (514) 499-1200