MEG Energy Corp.’s board of directors is advising shareholders to reject a revised hostile bid from Strathcona Resources Ltd., stating that it falls short compared to the more cash-focused friendly proposal from Cenovus Energy Inc. Strathcona’s initial offer combined cash and stock, and the latest bid increased to $30.86 per share from $28.02.
In contrast, Cenovus is offering MEG shareholders a choice between $27.25 in cash or 1.325 Cenovus common shares per MEG share, with certain restrictions. This translates to approximately $20.44 in cash and about one-third of a Cenovus share on a pro-rated basis.
MEG’s board chairman, James McFarland, expressed that the Strathcona offer remains unappealing due to its failure to address the risks associated with Strathcona shares adequately. He emphasized the Cenovus deal’s potential for share price growth, cash benefits, and certainty.
Both Cenovus and MEG own oilsands properties at Christina Lake near Fort McMurray, Alberta, highlighting potential efficiencies and cost savings through a merger. MEG CEO Darlene Gates noted strong support for the industrial rationale behind the Cenovus transaction from MEG shareholders.
Strathcona criticized the Cenovus deal as imbalanced and labeled the MEG board’s acceptance of it as flawed. The updated Strathcona bid includes a special distribution valued at around $4.18 per share if successful, but MEG argued that it would not benefit shareholders as it could diminish the combined company’s market value.
The Cenovus deal is subject to approval by a two-thirds majority vote by MEG shareholders scheduled for October 9. Strathcona plans to vote its 14.2% interest against the deal, with its offer remaining open until October 20.
