It is the biggest deal of the oil patch this year, yet investors are not exactly smiling. In the world of mergers and acquisitions in Canada, Baytex and Raging Rivers' $2.8B merger is big news. But it has been met with a chilly reception from investors.
Part of the reason for the deal, according to both sides, is to create a mega corporation with the muscle to develop Raging River's assets in the expensive Duvernay shale play in Alberta. Proponents of the deal say this merger would produce more than 100,000 barrels of natural gas liquids and oil this year alone. According to both sides, the two companies complement each other well and moving forward, they believe merging is the right move.
The merger recently caused Raging River's shares to drop 10 per cent. The news was even worse for Baytex investors since those shares fell nearly 15 per cent. Both improved slightly during the course of the announcement. Investors should take note since experts believe further mergers and acquisitions are on the horizon. Companies have been thinking of attracting investors with size and scale, but the latest market reaction to recent deals may make management rethink that strategy.
The world of mergers and acquisitions in Canada is both fascinating and complex. Those wishing to learn more about this realm might fare well by discussing the legal aspects with an experienced lawyer. Before making any off-the-cuff decisions regarding mergers and acquisitions, a lawyer's advice could be invaluable and may save potential costly mistakes that can wreak havoc on the pocketbook.