Cenovus Energy Inc.’s acquisition of MEG Energy Corp. is on track to secure shareholder approval this week. The oilsands giant increased its offer, which it described as the final one, and gained the backing of former competitor Strathcona Resources Ltd.
Patrick O’Rourke, managing director of institutional equity research at ATB Capital Markets, noted the likelihood of approval for the transaction following Monday’s news. The enhanced offer, comprising 50% cash and 50% stock, values at $30 per share based on Cenovus’ closing stock price on Friday.
MEG shareholders are set to vote on the offer on Thursday, with the board’s endorsement. The meeting was postponed from last week when it seemed the required two-thirds majority might not be met. Strathcona, previously pursuing a hostile all-stock offer for MEG, now plans to support Cenovus with its 14.2% stake.
MEG stated that approximately 79% of the shares represented by proxy or expected to be voted are in favor of the improved Cenovus proposal. Cenovus and MEG have adjacent oilsands operations at Christina Lake, emphasizing the cost benefits and efficiencies of combining forces. Strathcona also operates steam-driven facilities in the area.
The deal would boost Cenovus’ daily oilsands production by 110,000 barrels, reaching 720,000 barrels of oil equivalent per day, with a projected growth to 850,000 barrels by 2028. Cenovus also disclosed the sale of its Vawn thermal heavy oil assets in Saskatchewan and undeveloped land to Strathcona for $150 million, enhancing Strathcona’s operations.
Adam Waterous, Strathcona’s executive chairman, chose not to provide additional comments. Cenovus revised its offer for the second time, initially consisting of 75% cash and 25% equity. The saga began in April when Strathcona made a cash-and-stock bid to MEG, leading to subsequent developments and counteroffers between the companies.
Strathcona withdrew its bid citing unmet conditions, while certain MEG shareholders criticized what they viewed as unfair tactics to secure the deal with Cenovus.