In the bid for control of MEG Energy Corp., a cordial cash-heavy proposal from a major Canadian oilsands producer is being challenged by a revised hostile offer from Strathcona Resources Ltd., now solely based on stock. Strathcona’s updated proposal, revealed on Monday, offers 0.80 of its shares for each MEG share not already owned, previously a mix of cash and stock. This new bid values MEG at $30.86 per share, up from the earlier offer of $28.02 per share.
In contrast, the Cenovus offer gives MEG shareholders a choice between $27.25 in cash or 1.325 Cenovus common shares per MEG share, with certain restrictions. Strathcona has criticized the Cenovus deal as “unbalanced” and labeled the MEG board’s sale process as “flawed” for accepting the offer.
Adam Waterous, the executive chairman of Strathcona, expressed discontent with the MEG board’s decision, stating that they are missing out on potential shareholder value. He emphasized the significant increase in Cenovus’ stock price following the news of the deal with MEG and highlighted the different outcomes for shareholders under both offers.
Under the Strathcona proposal, MEG shareholders would retain a 43% stake in the combined entity, offering a different opportunity for long-term growth compared to a cash exit. The new offer is set to expire on Oct. 20, with no comments provided by MEG or Cenovus regarding the matter.
Waterous assured his commitment to the deal and expressed a willingness to enter into a lockup agreement to retain shares after the acquisition. The approval of the Cenovus deal requires a two-thirds majority vote by MEG shareholders, scheduled for Oct. 9, with Strathcona intending to vote its 14.2% interest against the deal.
Waterous criticized the MEG board’s decision, claiming that shareholders are dissatisfied with the Cenovus deal and alleging a breach of fiduciary duty. Both Cenovus and MEG operate in close proximity in the oilsands region, with Strathcona also having operations there, suggesting synergies in a potential merger.
In the stock market, MEG shares rose by 2%, Cenovus stock declined slightly, and Strathcona shares also experienced a decrease in value.