Strathcona Resources Ltd. has decided to withdraw its hostile takeover bid for MEG Energy Corp., allowing Cenovus Energy Inc. to proceed with its friendly acquisition offer. This move follows Cenovus enhancing its proposal for MEG, a fellow player in Alberta’s oilsands, while Strathcona also operates in the same region.
In a statement released on Friday, Strathcona stated that due to the revised agreement between MEG’s board and Cenovus, the conditions necessary for its offer, or any potential improved bid, are no longer feasible. Strathcona, which currently holds a 14.2% stake in MEG, had been proposing an exchange ratio of 0.80 of its shares for each MEG share it didn’t already possess.
Cenovus’ latest offer, announced recently, values MEG at $8.6 billion, inclusive of assumed debts, with an equal split between equity and stock components. This revised offer contrasts with Cenovus’ previous proposal, which included a higher cash portion, prompting some MEG shareholders to advocate for a greater share of the post-acquisition entity.
Expressing disappointment over the outcome, Strathcona acknowledged the collective efforts of its shareholders and fellow MEG investors in shaping a more equitable deal with Cenovus that enhances the future prospects for MEG shareholders. The company extended gratitude to its shareholders for their support during the MEG process.
Earlier this week, MEG and Cenovus disclosed amendments to their standstill agreement, permitting Cenovus to acquire around 10% of MEG’s shares. Strathcona criticized this move as unprecedented in the Canadian public markets and accused MEG’s board of engaging in anticompetitive actions.
Strathcona intends to provide a special distribution of $10 per share to all its shareholders, as pledged in case the MEG takeover did not materialize. The distribution is subject to two-thirds shareholder approval at a meeting scheduled for November 27.
Following the divestment of MEG, Strathcona will become the sole pure-play oil company in North America producing over 50,000 barrels per day without mines or refineries. Strathcona, MEG, and Cenovus all employ steam-assisted gravity drainage to extract oilsands bitumen.
MEG shareholders are set to vote on the revised Cenovus offer on October 22.
