In a showdown over MEG Energy Corp.’s ownership, a cordial cash-heavy proposition from a major Canadian oilsands producer clashes with a revamped hostile bid from Strathcona Resources Ltd., now exclusively reliant on stock.
Strathcona unveiled an adjusted offer on Monday, presenting 0.80 of its shares per MEG share not already held. Previously, their bid involved a mix of cash and stock. The updated offer values each MEG share at $30.86, an increase from the prior bid of $28.02 per share.
Contrastingly, the Cenovus offer allows MEG shareholders to opt between $27.25 in cash or 1.325 Cenovus common shares for each MEG share, subject to specific restrictions.
Strathcona criticizes the Cenovus proposal as “lopsided” and deems the MEG board’s sale process as “flawed” for accepting the offer.
Adam Waterous, the executive chairman of Strathcona, lambasted the MEG board for what he perceives as a missed opportunity for shareholders. He highlighted the significant rise in Cenovus’ stock following the announcement of the deal with MEG, indicating a $3.9 billion gain in market value that MEG shareholders might not fully benefit from.
Under the Strathcona deal, MEG shareholders would hold 43% of the new entity, offering a different strategic trajectory compared to the cash exit proposed by Cenovus.
The deadline for the new offer is set for October 20, with no responses from MEG or Cenovus as of Monday.
MEG’s apprehensions about Strathcona’s majority shareholder, Waterous Energy Fund, potentially selling its stake post-acquisition have been acknowledged. Waterous assured his commitment to the long-term and expressed willingness to enter a lockup agreement to support the bid.
The Cenovus deal necessitates approval by a two-thirds majority vote of MEG shareholders, scheduled for October 9. Strathcona intends to vote its 14.2% interest against the deal.
Waterous emphasized discontent among MEG shareholders regarding the Cenovus deal, criticizing the board’s decision as a breach of fiduciary responsibility.
Both Cenovus and MEG possess adjacent oilsands assets at Christina Lake, near Fort McMurray, Alberta. Strathcona’s operations in the same region offer comparable advantages, according to Waterous.
MEG shares saw a 2% increase, rising by 58 cents to $28.93 in early afternoon trading on the TSX. Conversely, Cenovus stock dipped by nine cents to $22.02, while Strathcona fell by 62 cents to $37.80, representing a 1.6% decrease.