Strathcona Resources Ltd. has decided to withdraw its hostile takeover attempt of MEG Energy Corp., paving the way for a more favorable bid from Cenovus Energy Inc., a neighboring company in Alberta’s oilsands region. This decision by Strathcona comes shortly after Cenovus improved its offer for MEG.
In a statement released on Friday, Strathcona expressed that due to the revised agreement between MEG’s board and Cenovus, the conditions necessary for its offer, or any potential enhanced offer, are no longer achievable. Strathcona, which holds a 14.2% stake in MEG, had proposed exchanging 0.80 of its shares for each MEG share not already owned.
Cenovus’s latest bid, announced on Wednesday, values MEG at $8.6 billion, inclusive of debt, with a mix of equity and stock components. This revised offer differs from Cenovus’s initial proposal, which included more cash. Some MEG shareholders had advocated for a greater share of the post-acquisition entity.
Despite feeling let down by the outcome, Strathcona expressed satisfaction in its efforts alongside other MEG shareholders, resulting in a more balanced deal with Cenovus that allows MEG shareholders to have a more significant stake in potential future gains.
In a significant move earlier this week, MEG and Cenovus adjusted the terms of their standstill agreement, enabling Cenovus to acquire approximately 10% of MEG’s shares. Strathcona criticized this action, labeling it as unprecedented in Canadian markets and part of a series of anticompetitive actions by MEG’s board.
Strathcona has decided to distribute a special payment of $10 per share to its shareholders, a commitment made if the MEG takeover plan fell through. This distribution is subject to approval by two-thirds of shareholders at a meeting set for November 27.
Following the sale 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. All three companies—Strathcona, MEG, and Cenovus—utilize steam-assisted gravity drainage to extract oilsands bitumen.
MEG shareholders are scheduled to vote on the revised Cenovus offer on October 22.
