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A tough market for Canadian energy has made life simpler for Husky Energy Inc. – at least where its hostile takeover bid for MEG Energy Corp. is concerned.

Husky’s $3.3-billion cash-and-stock offer expires on Wednesday afternoon, and by then it’s widely expected to have garnered the necessary 50 per cent of MEG shares to call it done, or be ready to extend the bid to acquire the remaining shares.

MEG formally rejected Husky’s unsolicited approach on Oct. 17, saying the odds of a richer offer were good and that other potentially interested parties were sniffing around. Then the bottom fell out of the Canadian crude market, and energy stocks followed suit. There are few large companies as exposed to the deep heavy-oil discounts as MEG Energy, a pure-play oil sands producer.

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MEG’s shares held up relatively well when heavy-crude prices tumbled to US$40 a barrel less than U.S. benchmark oil, but that was a function of it being in play. There’s little doubt the company would have been hit much harder in absence of a bid. Indeed, it had already been a tough slog for the onetime market star through the downturn, as it sold off assets and cut spending to reduce its sizable debt.

Last year, its founding chief executive officer, Bill McCaffery, stepped down and industry veteran Derek Evans was hired to lead the company, promising a focus on debt reduction and output gains at the company’s marquee Christina Lake, Alta., project.

It wasn’t long before Husky, which is majority-owned by companies controlled by the family of Hong Kong billionaire Li Ka-shing, made its move. Husky CEO Rob Peabody said MEG shareholders would be better protected in a larger, more diversified operation with the benefit of its own refining network. It has offered $11 cash or 0.485 of a Husky share. The cash tops out at $1-billion, so MEG shareholders who tender will end up with a combination platter worth less than $11.

Some analysts said initially that there was a chance for more money before the dust cleared, but that hope faded as the 105-day bid dragged on with no new bidders.

A lot can change in such a long time. On Dec. 24, Canadian oil and gas stocks skidded to their lowest in more than a decade, despite the Alberta government’s mandated cut in oil production that shrunk the discount. The TSX energy group has since staged a rebound from its nadir but it remains down 25 per cent versus a year ago. MEG also waived its shareholder rights plan.

“Specifically, unless an interloper emerges, we believe the deal will be completed on the current terms and close in a hostile form with there being no reason that Husky will need to lift the bid to get the transaction done,” Jon Morrison, analyst at Canadian Imperial Bank of Commerce, said in late December.

It has been a buyer’s market for unsolicited energy takeovers. Ensign Energy Group Inc.’s cash offer for Trinidad Drilling Ltd. won out late last year, after Ensign found itself faced with competition from a white knight. Precision Drilling Corp. emerged with an all-stock friendly bid that began as more valuable, but ended up out of the money as the market − and Precision shares − tumbled.

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Another complication for MEG has been its second-largest shareholder, Boston-based Highfields Capital Management, and its desire to bail. Last summer, Highfields managing director Daniel Farb quit MEG’s board and made very public complaints that the company was not acting in shareholders’ best interests. According to Husky’s offering circular, the company had spoken to Mr. Farb on the prospects of a deal before he resigned. In October, Highfields founder Jon Jacobson announced that the two-decade-old hedge fund was shutting down. That points to a need to sell out of remaining positions, such as MEG.

Husky’s timing looks to have been ideal. All it took was some decidedly bad times in the world around it.

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