Strathcona Resources Ltd. said it plans to oppose the acquisition of MEG Energy Corp. by Cenovus Energy Inc. with the purchase of a larger stake in the Canadian oil sands firm.
Strathcona plans to purchase an additional 5 percent of MEG’s outstanding common shares, the company said in a statement.
The Calgary, Alberta-based thermal oil producer said it also plans to vote its shares against the proposal to approve the acquisition of MEG by Cenovus “following discussions with fellow MEG shareholders over the past week”. The proposal requires approval by at least 66 and two-thirds percent of the votes cast by shareholders at the special meeting scheduled on Oct. 9, according to the statement.
Strathcona said it currently owns 23.4 million MEG shares, representing approximately 9.2 percent of the issued and outstanding shares of the company. Under applicable Canadian securities laws, while the offer is outstanding, Strathcona may acquire up to an additional 5 percent of the outstanding MEG Shares, which would bring the total stake of Strathcona to 14.2 percent.
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.
Under the terms of the 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.
“This transaction represents a unique opportunity to acquire approximately 110,000 barrels per day of production within some of the highest quality, longest-life oil sands resource in the basin, which sits directly adjacent to our core Christina Lake asset,” Cenovus President and CEO Jon McKenzie said in an earlier statement. “The magnitude of synergies that we have identified makes this a compelling value creation opportunity for Cenovus shareholders. The team at MEG has done a fantastic job developing these assets, and we look forward to leveraging our combined expertise and scale to drive additional value for many years to come”.
Under the terms of the agreement, each MEG shareholder will have the option to receive $27.25 in cash or 1.325 Cenovus common shares for each MEG common share, subject to pro-ration.
The transaction, unanimously approved by the boards of both companies is expected to close in the fourth quarter of 2025, subject to the satisfaction of customary closing conditions, including regulatory approvals and approval of the transaction by MEG shareholders.
On May 30, Strathcona made a formal offer to acquire all of the issued and outstanding MEG shares it does not already own for a combination of 0.62 of a Strathcona share and $4.10 in cash per MEG share. MEG’s board released a statement saying that the acquisition bid was “inadequate, opportunistic, and not in the best interests of MEG or its shareholders”.
After being rebuffed by MEG Energy on its offer to acquire all the issued and outstanding shares of the company, Strathcona said it “welcomes the MEG board’s efforts to market-test the offer against other acquisition proposals”.
To contact the author, email rocky.teodoro@rigzone.com
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