Cenovus Offer Changes the Game
Strathcona Resources Ltd. has officially withdrawn its hostile takeover bid for MEG Energy Corp., clearing the path for a rival, friendly merger with Cenovus Energy Inc.
The decision comes just two days after Cenovus Energy sweetened its offer, valuing MEG at $8.6 billion, including debt — half in cash and half in stock — following shareholder pressure for a better equity balance.
Strathcona, which owns 14.2% of MEG, had previously offered 0.80 of its own shares for each MEG share it did not already hold.
In a statement Friday, the company said the conditions for any improved offer are no longer achievable given the new agreement between MEG’s board and Cenovus.
Strathcona’s Exit and Response
“While Strathcona is disappointed with this outcome, it is pleased that its actions, along with those of its fellow MEG shareholders, resulted in a more equitable transaction with Cenovus,” the company said in a release.
Strathcona also criticized MEG’s board for repeatedly extending Cenovus’s meeting date and allowing it to buy and vote additional shares, calling it “without precedent in Canadian public markets.”
Despite the setback, Strathcona announced plans to pay a special distribution of $10 per share to all shareholders, pending approval at its Nov. 27 meeting.
Next Steps for Cenovus and MEG
Cenovus and MEG have amended their standstill agreement, giving Cenovus permission to purchase up to 10% of MEG’s shares before the upcoming shareholder vote on Oct. 22.
Once the deal closes, MEG shareholders will hold a more substantial stake in the combined company, granting them greater participation in future growth.
Strathcona, meanwhile, said it will remain the only pure-play oilsands producer in North America pumping more than 50,000 barrels per day without owning a mine or refinery.
