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MEG Energy Corp. Urges Shareholders to Reject Hostile Bid from Strathcona Resources

Strategic Insights

— 1 min read

Strathcona Resources Ltd. recently revised its hostile bid for MEG Energy Corp., offering 0.80 of a share for each MEG share it does not already own. However, MEG's board of directors views this offer as inferior to the lower-but-more-cash-heavy friendly offer from Cenovus Energy Inc. The Cenovus offer would provide MEG shareholders with a choice between $27.25 in cash or 1.325 Cenovus common shares for each MEG share, subject to certain limits. MEG's board chair, James McFarland, stated that the revised Strathcona offer fails to address significant risks embedded in Strathcona shares and that MEG shareholders would be exposed to inferior assets, an unproven track record, and governance risk.

Key Takeaways:

  • MEG Energy Corp.'s board of directors is urging shareholders to reject a sweetened hostile bid from Strathcona Resources Ltd.
  • The board views Strathcona's offer as inferior to the friendly offer from Cenovus Energy Inc., citing significant risks and poor valuation.
  • Cenovus Energy Inc. has offered MEG shareholders the choice between $27.25 in cash or 1.325 Cenovus common shares for each MEG share, subject to certain limits.
  • MEG shareholders would own 43% of the new entity under the Strathcona deal, compared to 4% under the Cenovus deal.
  • The Cenovus deal must be approved by a two-thirds majority vote by MEG shareholders, with a vote expected to be held on October 9.
  • Strathcona Resources Ltd. intends to vote its 14.2% interest in MEG against the Cenovus deal, with its own offer remaining available until October 20.
  • The revised Strathcona offer is valued at $30.86 per share, up from $28.02 in its initial offer.

Statistics:

  • Strathcona Resources Ltd. owns 14.2% of MEG Energy Corp.
  • The Cenovus deal requires a two-thirds majority vote by MEG shareholders to pass.
  • MEG shareholders would choose between $27.25 in cash or 1.325 Cenovus common shares for each MEG share under the Cenovus deal.
  • The Cenovus deal is valued at $20.44 in cash and about one-third of a Cenovus share on a fully pro-rated basis.

Sources:

  • Lauren Krugel, The Canadian Press
  • MEG Energy Corp. news release (no date)
  • Cenovus Energy Inc. news release (no date)
  • Strathcona Resources Ltd. news release (no date)

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