Smart People Trump A Simply Bigger Suncor

Jun 7th, 2009 – 1 Comment

What will happen once Suncor completes its acquisition of Petro-Canada? Will there be just one stock and PCA stock listing will disappear? Will Suncor’s stock price rise because it is a much larger company at that point? Alan,Calgary Hi Alan, You have it right the shares of Suncor Energy ( SU TSX ) will continue […]


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What will happen once Suncor completes its acquisition of Petro-Canada? suncorWill there be just one stock and PCA stock listing will disappear? Will Suncor’s stock price rise because it is a much larger company at that point?

Alan,Calgary

Hi Alan,

You have it right the shares of Suncor Energy ( SU TSX ) will continue to trade while Petro Canada ( PCA) will have its stock delisted. The shares of the now much larger company should, over time, trade higher because of a number of factors.

The management team will realize a certain amount of efficiencies from eliminating the redundencies that arise from the combined operations. They will also be able to leverage their relationships with suppliers given the greater scope of their opportunities.

Another factor to consider is that Rick George, over the course of his career, has been ahead of the pack when it comes to expanding in the oil sands. He was neck deep into a major expansion when oil hit $11 a barrel in late 1997. And this merger came at a time when everyone else was hesitant to act. To me this cobra knows when to strike!

Another value driver will be the expanded footprint that the company will have in the Athabasca Oil Sands. These are long lived  reserves that will be producing oil for many decades to come. Besides the oil sands the company will also control a greater share of refining and retailing of oil in Canada.su2

The chart shows that Suncor has benefited from the Market rally that started on March 9 and is in an uptrend. There is a golden cross in place which indicates that the trend should continue. There is resistance at $45 that has to be taken out to sustain the rally.

The bigger size of the the combined company will certainly lead to some value creation but the  expanded intellectual capacity of the management team is what will do more for shareholders than anyother factor. The right people will always make you money.

Happy Capitalism!

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