Cenovus Buys Into MEG in Open Market as Takeover Bid Advances

Cenovus Energy Inc said Tuesday it has acquired 8.5 percent of MEG Energy Corp’s common stock through open trading, even as its takeover offer for the pure-play oil sands producer progresses with Strathcona Resources Ltd dropping a competing bid.

The open-market acquisition involved about 21.72 million shares out of around 254.38 million MEG common shares issued and outstanding, Toronto- and New York-listed Cenovus said in a statement on its website.

Cenovus started buying into Toronto-listed MEG October 8, according to Tuesday’s statement. That day, Cenovus announced it had signed a new agreement with MEG that amended the price and the cash-and-stock allocation for the takeover.

The transactions happened “through the facilities of the Toronto Stock Exchange or other Canadian alternative exchanges or markets”, Cenovus said.

“The MEG common shares were acquired by Cenovus in furtherance of its previously announced transaction with MEG”, Cenovus said. “To the extent Cenovus is able, the company intends to vote any acquired shares in favor of the transaction”.

Under the amended agreement, each MEG shareholder can opt to receive for each MEG common share CAD 29.5 ($21) in cash or 1.24 Cenovus common shares, subject to a maximum of $3.8 billion in cash and 157.7 million Cenovus common shares.

“The pro-rated consideration represents a mix of 50 percent cash and 50 percent Cenovus common shares”, Cenovus said in a press release October 8.

“On a fully pro-rated basis, the consideration per MEG common share represents approximately CAD 14.75 in cash and 0.62 of a Cenovus common share.

“The fully pro-rated consideration for MEG represents a value of approximately CAD 29.8 per MEG share at Cenovus’ closing share price on October 7, 2025, an increase of approximately CAD 1.32 per share based on current market pricing relative to the terms of the original arrangement agreement.

“The consideration under the amended agreement represents Cenovus’ best and final offer for MEG”.

Cenovus president and chief executive Jon McKenzie said, “We received support from the majority of MEG’s shareholders for our transaction. However, many MEG shareholders indicated that they would prefer to receive greater Cenovus share consideration, so that they can more fully participate in the upside of the combined company”.

Concurrently Cenovus and MEG edited their standstill agreement “to allow Cenovus to complete purchases of up to 9.9 percent of MEG’s outstanding common shares”, according to the October 8 statement.

“As a result of the lower maximum cash consideration to be issued under the amended agreement, if the transaction is approved by MEG shareholders, Cenovus intends to increase planned share repurchases over the coming quarters”, the statement said.

MEG chair James McFarland said in a separate online statement by MEG October 8, “This marks the third enhancement to the terms originally put forward by Cenovus, delivering a significant increase to an already attractive transaction… The improved transaction consideration implies a flowing-barrel metric of CAD 79,500 per bpd, the highest value ever paid for a pure-play oil sands asset”.

MEG shareholders have until October 22 to vote on the merger, which needs an approval of at least approximately 66.67 percent of MEG shareholders represented in person or by proxy at the October 22 meeting, MEG said October 8.

Two days later Toronto-listed Strathcona, already a MEG shareholder, said it had terminated its bid.

“As a result of the revised arrangement agreement between the MEG board of directors and Cenovus Energy Inc, Strathcona believes the conditions to its offer, or any reasonably improved offer, are no longer capable of being satisfied”, Strathcona said in an online statement October 10.

“On the back of a failed shareholder vote, the MEG board’s decision to waive Cenovus’ standstill and allow it to vote shares acquired after the record date in favor of its own transaction is without precedent in the Canadian public markets and the latest in a series of anti-competitive actions taken by the MEG board.

“Strathcona has concluded that the MEG board’s ability to continuously extend the Cenovus meeting date, and continuously allow Cenovus to purchase and vote additional shares, makes an improved offer for MEG impractical and not in the best interests of Strathcona shareholders.

“While Strathcona is disappointed with this outcome, it is pleased that its actions, along with those of its fellow MEG shareholders, delivered something which the MEG board could not, namely a more equitable transaction with Cenovus which allows MEG shareholders to participate more meaningfully in future upside”.

Strathcona added, “Following the sale of MEG, Strathcona will be the only pure-play oil company in North America producing more than 50 Mbbls/d without mines or refineries”.

MEG has yet to reply to Rigzone’s request for comment on Strathcona’s statement.

Strathcona had increased its shareholding in MEG, which would allow it to vote more shares against Cenovus’ offer.

In an online statement September 4, Strathcona said its ownership of issued and outstanding MEG shares increased from about 11.8 percent to about 14.2 percent as of the date.

MEG produces oil through steam-assisted gravity drainage (SAGD) at Alberta province’s Christina Lake, where Cenovus already has SAGD production. Cenovus also has thermal and conventional crude oil and natural gas projects across Western Canada, crude production offshore Newfoundland and Labrador and gas and liquids production offshore China and Indonesia, as well as downstream operations in Canada and the United States, according to Cenovus.

Cenovus and MEG have a combined SAGD oil sands production of over 720,000 barrels per day, according to Cenovus’ initial announcement of the agreement August 22.

To contact the author, email jov.onsat@rigzone.com