Penn West Energy served notice Wednesday with its $3.6-billion bid for Canetic Resources Trust that it intends to be a dominant player in the oil patch, as a trust or conventional company. Penn West executives used their latest acquisition - the company is also reeling Vault Energy Trust into the fold - as an opportunity to trumpet their muscle in any corporate structure. The goal is to build a great investor following and premium valuation on the back of a market-leading $15-billion capitalization and superior operating performance. This strategy follows a trail blazed by Rick George and his team at Suncor. With several years left as a tax efficient trust, then a move to a harsher tax regime in 2011, Penn West pointed out Wednesday that the Canetic acquisition will create tax pools of $5.5-billion that can likely be expanded, "resulting in an efficient tax position well beyond 2011." And as a larger play that must constantly replace energy reserves, Penn West will have the ability to do larger acquisitions once the Canetic purchase closes. The federal government's guidelines on trust acquisitions allow Penn West to contemplate up to $8.7-billion in purchases while still preserving its tax efficient status through 2011. With a deeper combined management team in the offing, this takeover clearly sets the stage for further deals. Scotia Capital is financial adviser to Penn West. This being the oil patch, a deal can't seem to get done without a cast of thousands, so CIBC World Markets and RBC Dominion Securities were also cited by Penn West as "strategic advisers." BMO Nesbitt Burns and TD Securities worked with Canetic, with BMO Nesbitt Burns also chipping in a favourable fairness opinion for the Canetic board.
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