Strathcona Resources Ltd. said Thursday it filed an amended offer to acquire all of the outstanding shares of MEG Energy Corp. for 0.80 Strathcona shares per MEG share, in its latest move to win the takeover battle with Cenovus Energy Inc.
Cenovus on Aug. 22 said it entered into a definitive arrangement agreement to acquire MEG in a cash-and-stock transaction valued at $7.9 billion, inclusive of assumed debt. Since then, Strathcona said it has been approached by “a substantial portion of the MEG shareholder base” giving feedback that the deal “meaningfully undervalues MEG and allows Cenovus to keep the vast majority of future upside for itself due to its cash-heavy consideration structure”.
Strathcona’s amended offer reflects a 10 percent increase to its original offer and equates to an 11 percent premium to the Cenovus-MEG agreement, the company said, adding that feedback on it from MEG shareholders has been “overwhelmingly positive” to date.
Strathcona said it “remains ready and willing to engage constructively and in good faith with the MEG board of directors to enter into a supported transaction”.
Strathcona also reaffirmed Waterous Energy Fund’s (WEF) willingness to enter into a mutually acceptable lock-up agreement to “assuage any unfounded concerns around future selling of Strathcona shares by WEF,” according to the statement.
Under the terms of the Cenovus-MEG agreement, Cenovus will acquire all of the issued and outstanding common shares of MEG for $27.25 per share, which will be paid 75 percent in cash and 25 percent in Cenovus common shares. The transaction is expected to close in the fourth quarter.
Last week, Strathcona confirmed its purchase of around 6 million MEG shares for approximately $172.7 million, bringing its total ownership to 14.2% of the issued and outstanding shares.
Strathcona said it intends to vote against the resolution to approve the acquisition of MEG by Cenovus, which requires approval by at least 66 and two-thirds percent of the votes cast by shareholders at the special meeting scheduled on Oct. 9.
Cenovus and MEG did not immediately reply to requests for comment from Rigzone.
Cenovus to Divest WRB Refining Stake
On Tuesday, Cenovus said it reached an agreement for the sale of its 50 percent interest in WRB Refining LP to its joint venture partner Phillips 66, indirectly through Cenovus’ subsidiaries, for $1.4 billion in cash.
The WRB joint venture includes the Wood River Refinery in Illinois and the Borger Refinery in Texas, which have combined crude throughput capacity of 495,000 barrels per day (bpd), or 247,500 bpd net to Cenovus, the company said in a statement.
The transaction is expected to close around the end of the third quarter, subject to the satisfaction of customary closing conditions, Cenovus said.
After divesting its interest in WRB, Cenovus’ downstream business will consist of the Lloydminster Upgrader, Lloydminster Refinery, Lima Refinery, Toledo Refinery and Superior Refinery. Total crude throughput capacity of the business will be 472,800 bpd consisting of approximately 55 percent heavy oil, according to the statement.
“This transaction aligns with our strategy of owning and operating the assets that are core to our business. After the sale of WRB, our downstream business will be more focused, comprised of assets we control, which provide physical integration and egress for our leading upstream heavy oil business,” Cenovus President and CEO Jon McKenzie said. “The proceeds from this transaction will allow us to accelerate shareholder returns over the near term”.
Proceeds from the transaction will be used to reduce the company’s net debt and to accelerate returns to shareholders in the form of increased share repurchases, Cenovus said.
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