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., which has shifted to a stock-based offer.
Strathcona’s updated proposal, revealed on Monday, now offers 0.80 of its shares for each MEG share it doesn’t already possess, compared to its previous mixed cash-and-stock bid. The new offer values MEG at $30.86 per share, up from the earlier bid of $28.02 per share.
On the other hand, Cenovus has put forward an offer where MEG shareholders can opt for either $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 slammed MEG’s board for endorsing the offer, calling the sale process “flawed.”
Adam Waterous, Strathcona’s executive chairman, expressed his discontent with MEG’s board, accusing them of leaving substantial shareholder value on the table. Waterous highlighted the significant stock price increase of Cenovus following the MEG deal announcement, contrasting it with the typical decline in an acquirer’s share value after such news.
Waterous emphasized the divergent paths between the two offers, stressing the potential financial benefits for MEG shareholders under Strathcona’s proposal, where they would own 43% of the combined entity compared to a minimal ownership stake in Cenovus post-acquisition.
The new Strathcona offer is set to expire on October 20, with no comments provided by MEG or Cenovus regarding the matter.
MEG’s board has expressed concerns over Strathcona’s majority shareholder, Waterous Energy Fund, potentially divesting its stake post-acquisition. Waterous assured his commitment to remain invested post-deal closure and offered a lockup agreement to retain shares if MEG supports their bid.
The Cenovus deal is subject to approval by a two-thirds majority vote of MEG shareholders scheduled for October 9, while Strathcona intends to vote its 14.2% stake against the proposal.
Waterous highlighted discontent among MEG shareholders regarding the Cenovus deal and criticized the board’s decision, hinting at potential repercussions in corporate governance literature.
Both Cenovus and MEG have adjacent oilsands assets near Fort McMurray, Alberta, with Strathcona also having operations in the region, suggesting synergies with their firm.
Market reactions saw a 2% increase in MEG shares to $28.93, while Cenovus stock dipped slightly by 0.5% to $22.02, and Strathcona dropped 1.6% to $37.80 in early afternoon trading on the TSX.
