(BOE Report)– The contest for MEG Energy is entering its final stages, with two competing bids on the table and shareholders set to vote in October. The upcoming votes will determine whether MEG is acquired by Cenovus, taken over by Strathcona, or remains independent.
Key Dates Ahead
Several important dates now define the timeline:
October 7: Proxy voting deadline for MEG shareholders on the Cenovus arrangement.
October 9: Special shareholder meeting to vote on Cenovus’s bid.
October 20: Expiration of Strathcona’s revised offer.
Strathcona, which already holds roughly 14% of MEG’s shares, has said it will vote against the Cenovus deal, making the outcome far from certain.
Why the Cenovus Bid Might Succeed
Cenovus is offering a mixture of cash and shares that has an implied value based on Cenovus’ share price of ~$28.18 per MEG share (fully pro-rated based on cash and equity limits). This bid provides shareholders with a high degree of certainty and liquidity.
The proposal has also secured support from independent proxy advisory firms ISS and Glass Lewis, whose recommendations often carry weight with institutional investors. In addition, MEG’s board has unanimously endorsed Cenovus’s offer, pointing to its stronger balance sheet, completed regulatory approvals, and the stability provided by a large, established acquirer. The company insists that Strathcona carries more leverage, its shares are less liquid than Cenovus’s, and its governance structure is dominated by a controlling shareholder. These factors could make some investors cautious despite the higher implied value.
For risk-averse shareholders, the combination of cash certainty, proxy advisor backing, and board support could be persuasive, even if the headline value lags Strathcona’s bid.
Why the Strathcona Bid Might Succeed
Strathcona’s revised offer consists of 0.80 Strathcona shares for each MEG share, implying a value of about C$29.20 per MEG share at the current Strathcona share price. This is a premium to the Cenovus offer, and it provides shareholders the opportunity to participate fully in the upside potential of the combined company.
Strathcona has also made clear its opposition to the Cenovus arrangement and, with its significant ownership stake, has the ability to influence the outcome of the October 9 vote. For shareholders seeking higher immediate value and more long-term upside exposure to commodity prices, Strathcona’s bid has appeal. Investors may feel that Cenovus’ cash heavy bid doesn’t allow for as much upside participation should commodity prices be at a cycle trough.
Why Shareholders Might Reject Both Offers
A third possibility is that MEG shareholders reject both proposals.
MEG holds high-quality oil sands assets and continues to generate solid cash flow in a favorable commodity environment. Some shareholders may believe the company’s standalone value is stronger than either bid, or that rejecting the current offers could pressure one or both suitors to return with improved terms.
There is also historical precedent. In 2018, MEG shareholders turned down a hostile takeover bid from Husky Energy, although it came at a significantly lower equity price ($11/share) than today’s levels. That rejection was rooted in the belief that MEG’s long-term prospects outweighed the immediate premium on offer. The memory of that decision may encourage some shareholders to consider once again whether independence can deliver more value than selling at a price they deem insufficient.
One influential former shareholder who once owned 6 million shares of MEG, Eric Nuttall of Ninepoint Partners, told In The Money with Amber Kanwar that he has sold his entire stake under the belief that there is some risk that both deals might fall apart, according to an article published here by In The Money with Amber Kanwar.
Remaining independent also avoids the governance and integration risks that come with either transaction, preserving MEG’s strategic flexibility in a sector where long-term demand and pricing remain uncertain.
Outlook
Cenovus brings stability, cash certainty, and institutional backing. Strathcona offers a higher implied value and potential equity upside. And independence remains a viable option if shareholders feel neither bid reflects MEG’s full potential.
The coming shareholder votes will ultimately be a test of investor priorities: whether they prefer immediate certainty, future growth potential, or the belief that MEG can create more value on its own.
