Cenovus Energy Inc.’s acquisition of MEG Energy Corp. is on track to receive shareholder approval later this week following an increased offer and endorsement from former competitor Strathcona Resources Ltd. The revised proposal, consisting of a combination of cash and stock, values MEG shares at $30 each based on Cenovus’ closing stock price on Friday. Initially, Cenovus had offered $29.50 in cash or 1.240 Cenovus shares worth $29.65.
MEG shareholders are set to vote on the offer, backed by their board, on Thursday after a delay from last week when it seemed the approval might fall short of the necessary two-thirds majority. Strathcona, which abandoned its hostile all-stock bid for MEG, now plans to support the new Cenovus offer with its 14.2% stake.
The consolidation of Cenovus and MEG’s adjacent oilsands assets at Christina Lake, near Fort McMurray, Alberta, is expected to yield cost efficiencies. Strathcona also operates steam-driven ventures in the region. The transaction would augment Cenovus’ daily oilsands production by 110,000 barrels, raising it to 720,000 barrels of oil equivalent per day, with a projected growth to 850,000 barrels by 2028.
Additionally, Cenovus disclosed the sale of its Vawn thermal heavy oil facility in Saskatchewan and undeveloped land in western Saskatchewan and Alberta to Strathcona for $150 million, including an initial $75 million in cash. The properties, currently producing around 5,000 barrels of oil equivalent per day, are deemed more impactful for a smaller entity like Strathcona than for Cenovus.
This marks Cenovus’ second enhancement of the offer, despite initial claims of finality. The acquisition process began in April when Strathcona approached MEG with a bid, leading to subsequent developments and counteroffers between the involved parties. Strathcona eventually withdrew its pursuit, citing unmet conditions, while some MEG shareholders criticized perceived coercive tactics by Cenovus.