Cenovus Energy Inc. has put forth a cash-and-stock proposal to acquire MEG Energy Corp., emphasizing its premium value and the certainty it offers compared to a rival all-stock bid from Strathcona Resources Ltd.
In a detailed presentation, Cenovus highlighted its scale, industry expertise, top-tier assets, immediate growth prospects, diversified revenue streams, robust financial position, and clear synergies as key advantages for MEG shareholders to consider in the friendly transaction.
Strathcona recently adjusted its hostile offer to 0.80 shares for each MEG share not already under its ownership, enhancing the value to $30.86 per share from the previous $28.02, which was a mix of cash and stock. Conversely, Cenovus’ proposal consists of 72% cash and 28% stock, valuing MEG at $28.44 per share, marking a 39% premium over MEG’s mid-May stock price and setting a record for the highest value ever paid for a solely steam-driven oilsands asset.
Cenovus raised concerns about potential risks associated with Strathcona’s offer, citing the possibility of a decline in Strathcona’s share price post-acquisition and labeling it as “overvalued.” The MEG board unanimously endorsed Cenovus’ bid over Strathcona’s, deeming the latter as “fundamentally unappealing.”
Strathcona criticized the Cenovus deal as “lopsided” and accused the MEG board of overseeing a flawed sale process by favoring Cenovus without adequately considering Strathcona’s competing proposal. Strathcona’s executive chairman pointed out Cenovus’ stock surge following the announcement of the deal with MEG, highlighting the atypical market response.
Notably, MEG shareholders would possess only a modest ownership stake in the post-acquisition company under Cenovus, whereas they would hold a 43% interest in the new entity under Strathcona. The approval of Cenovus’ offer requires a two-thirds majority vote from MEG shareholders scheduled for October 9, with Strathcona expressing its intent to vote against the deal using its 14.2% stake in MEG.
Both Cenovus and MEG operate adjacent oilsands properties in Christina Lake, located south of Fort McMurray, Alberta, while Strathcona also maintains operations in the same region.