The executive chair of Canadian oil company Strathcona Resources told Reuters he is confident his newly sweetened offer to buy MEG Energy will be enough to clinch a heated bidding war, in which a key decision is expected by Monday.
Calgary-based MEG Energy has said it will respond on or before September 15 to the revised offer Strathcona made earlier this week to acquire the company, which is Canada’s last remaining pure-play oil sands producer. Under the terms of an existing agreement with larger company Cenovus Energy, MEG must determine whether Strathcona’s new bid is superior to the deal it has already entered into with Cenovus. A decision in favour of Strathcona’s new bid – which values MEG at C$30.86 per share, above the C$27.79 valuation of Cenovus’ August cash-and-stock agreement – would mean Cenovus must increase its own offer or give up on acquiring the company.
In an interview on Thursday evening, Strathcona’s Adam Waterous said he has received positive comments from MEG shareholders since increasing his firm’s offer.
“We have received overwhelming feedback from MEG shareholders that they are not happy with the MEG board deal,” Waterous said.
Cenovus CEO Jon McKenzie told Bloomberg News on Wednesday that the company does not plan to raise its bid for MEG.
“Given the fact that Cenovus said they will not increase their bid, the MEG board is going to have to do legal backflips to continue to deem the Cenovus proposal superior to Strathcona’s and not terminate their agreement with them,” Waterous said.
Strathcona had proposed C$23.27 per share in its initial hostile bid in May. While Cenovus is offering a combination of cash and shares, Strathcona is offering an all-stock deal – something Waterous said gives MEG shareholders a better chance to capitalize on future growth of the company.
MEG’s Christina Lake oil sands project has become a prized asset, as one of Canada’s few large-scale expansion opportunities. Cenovus’ offer would combine MEG’s Christina Lake operations with Cenovus’ adjacent assets, creating one of Canada’s largest oil sands companies producing more than 720,000 barrels per day.
The smaller Strathcona, backed by private equity firm Waterous Energy Fund, is one of North America’s fastest-growing oil companies and has been building its position in MEG, disclosing that it owns or controls about 14.2 per cent of shares. Waterous has said his fund will vote against the Cenovus transaction at an October 9 MEG shareholder meeting, where two-thirds approval is required.
