Cenovus Energy Inc. has put forth a cash-and-stock proposal for MEG Energy Corp., emphasizing its premium valuation and certainty compared to Strathcona Resources Ltd.’s all-stock bid. In a detailed presentation, Cenovus highlighted its scale, top-notch industry experience, prime assets, immediate growth prospects, diversified revenue streams, robust financial position, and clearly outlined synergies as key reasons for MEG shareholders to consider their amicable offer.
Strathcona recently adjusted its hostile bid to offer 0.80 of its shares for each MEG share not already held. Initially, their proposal included a mix of cash and stock. Following the revision, the bid translated to $30.86 per share, an increase from $28.02 previously.
Cenovus’ offer comprises 72% cash and 28% stock, with an implied value of $28.44 per share, representing a substantial 39% premium over MEG’s mid-May trading price. This bid is noted to be the highest ever paid for a steam-driven oilsands asset.
Cenovus has raised concerns about the risks associated with Strathcona’s deal, citing potential share price declines post-acquisition and labeling Strathcona’s current share value as “overvalued.” MEG’s board has unanimously endorsed Cenovus’ proposal, deeming Strathcona’s bid as “fundamentally unattractive.”
Strathcona has criticized Cenovus’ offer as “lopsided,” accusing MEG’s board of accepting it without adequately considering their competing bid. Adam Waterous, Strathcona’s executive chairman, pointed out the significant increase in Cenovus’ stock value following the MEG deal announcement, a trend contrary to typical acquirer stock price behavior.
Notably, under the Strathcona agreement, MEG shareholders would retain a 43% ownership stake in the combined entity, compared to just 4% under the Cenovus deal. The approval of Cenovus’ offer necessitates a two-thirds majority vote by MEG shareholders, scheduled for October 9. Strathcona has expressed its intent to vote its 14.2% MEG interest against the proposed deal.
Cenovus and MEG possess adjacent oilsands assets at Christina Lake, situated south of Fort McMurray, Alberta, while Strathcona also operates in the same region.