Strathcona Resources Ltd. has decided to withdraw its aggressive pursuit of acquiring MEG Energy Corp., paving the way for a friendly bid from Cenovus Energy Inc., a competing energy company. This development comes shortly after Cenovus improved its offer for MEG, a company based in Alberta’s oilsands region, which is also where Strathcona operates.
In a statement released on Friday, Strathcona stated that due to the revised agreement between MEG’s board of directors and Cenovus Energy Inc., the conditions necessary for its offer, or any potential enhanced offer, are no longer achievable. Strathcona, which currently holds a 14.2% stake in MEG, had proposed exchanging 0.80 of its shares for each MEG share it did not already possess.
Cenovus’ latest offer, announced on Wednesday, values MEG at $8.6 billion, including assumed debt, with a mix of equity and stock components. This revised offer represents a shift from Cenovus’ previous cash-heavy proposal, as some MEG shareholders had advocated for a greater stock component in the deal.
Expressing disappointment but also acknowledging the positive impact of their efforts, Strathcona mentioned that the actions taken by itself and fellow MEG shareholders led to a more equitable deal with Cenovus, providing MEG shareholders with enhanced participation in future potential gains.
Meanwhile, earlier this week, MEG and Cenovus disclosed amendments to their standstill agreement, allowing Cenovus to acquire approximately 10% of MEG’s shares. Strathcona criticized this move, labeling it as unprecedented in the Canadian public markets and part of a pattern of anticompetitive behavior by MEG’s board.
Strathcona has confirmed its intention to distribute a special payment of $10 per share to all its shareholders, as previously pledged in the event the MEG acquisition failed. Shareholder approval for this distribution will be sought at a meeting scheduled for Nov. 27.
After the completion of the MEG sale, Strathcona will emerge as the sole pure-play oil company in North America producing over 50,000 barrels per day without mining or refineries. All three companies – Strathcona, MEG, and Cenovus – employ steam-assisted gravity drainage to extract oilsands bitumen. MEG shareholders are set to vote on the revised Cenovus offer on Oct. 22.