The battle for control of MEG Energy Corp. is intensifying with a friendly cash-heavy offer from a major Canadian oilsands producer facing off against a revised hostile bid from Strathcona Resources Ltd., now solely stock-based.
In an updated proposal revealed recently, Strathcona is offering 0.80 of its shares for each MEG share it doesn’t already possess, shifting away from its previous cash and stock combination. This new offer values MEG shares at $30.86 each, up from the earlier bid of $28.02 per share.
On the other hand, the Cenovus offer presents MEG shareholders with a choice between receiving $27.25 in cash or 1.325 Cenovus common shares for each MEG share, with certain restrictions in place.
Strathcona has criticized the Cenovus deal as “lopsided” and labeled the MEG board’s sale process as “flawed” for accepting such terms.
Adam Waterous, the executive chairman of Strathcona, expressed dissatisfaction with the MEG board’s decision, stating that they are neglecting the interests of shareholders by leaving potential gains on the table. He highlighted the significant increase in Cenovus’ stock value post-announcement and emphasized the divergent outcomes of the two offers.
Under the Strathcona proposal, MEG shareholders would retain a 43% stake in the combined entity, offering a different long-term strategy compared to the cash exit proposed by Cenovus.
The deadline for the new offer is set for October 20. Both MEG and Cenovus declined to comment on the matter when contacted.
MEG’s concern about Strathcona’s major shareholder, Waterous Energy Fund, potentially divesting its stake post-acquisition was mentioned. However, Waterous assured his commitment to the deal’s longevity and willingness to lock up shares to support the bid.
The approval of the Cenovus deal requires a two-thirds majority vote by MEG shareholders, scheduled for October 9. Strathcona plans to vote against the deal with its 14.2% interest in MEG.
Waterous expressed widespread shareholder discontent with the Cenovus deal and criticized the MEG board’s decision-making process, hinting at potential ramifications for corporate governance practices.
Cenovus and MEG have adjacent oilsands assets at Christina Lake in Alberta, with Strathcona also operating in the same region. Waterous highlighted the synergies that a merger with his company could offer.
Following these developments, MEG shares saw a 2% increase to $28.93 on the TSX, while Cenovus stock dipped slightly by nine cents to $22.02, and Strathcona shares fell by 1.6% to $37.80.
The ongoing battle for MEG Energy Corp. continues to draw attention and scrutiny within the industry.
