The offer contests rival firm's bid
Oil and gas producer Strathcona Resources Ltd. (Strathcona) has revised its offer to acquire oilsands producer MEG Energy Corp (MEG), battling its deal with rival firm Cenovus Energy Inc.’s (Cenovus).
As reported by BNN Bloomberg, Strathcona’s new bid now offers 0.80 of a share for every MEG share that is not already owned, which entails $30.86 per share. This would allow MEG shareholders to own 43 percent of a post-takeover company following the acquisition. Reuters reported that the offer will also give MEG an equity value of $7.85 billion.
In a press release, Strathcona had also confirmed the purchase of 6,035,600 common shares of MEG for $172.7 million last September 4, which brought the total of its MEG Shares to 36,100,000 or 14.2 per cent of issued and outstanding stock.
Strathcona’s move to raise its offer aimed to block the deal between Cenovus and MEG, which gave MEG shareholders a choice between $27.25 in cash or 1.325 Cenovus common shares for each MEG share. BNN Bloomberg reported that Strathcona criticized the deal, stating it was disproportionate and that the sale process of the oilsands producers’ board was “broken” for taking the offer.
Strathcona executive chairman Adam Waterous pointed out how Cenovus’ stock had increased by 10 percent following the deal’s announcement, equating to a $3.9 billion gain in its stock market value. Waterous noted that the share price of acquirers would typically drop after such news being publicized.
MEG responded to Strathcona’s offer through a press release stating that its special committee and board will evaluate it with the intention to respond on or before Sept. 15. Notably, BNN Bloomberg reported that MEG’s board had expressed their concerns regarding the Waterous Energy Fund, Strathcona’s majority shareholder that is run by Waterous, selling its stake following the firm’s takeover.
Waterous had stated that he had no intention of exiting after closing the deal and that the fund is willing to enter a lockup agreement to not sell the shares if the bid would be supported.
“I have not spoken to a single MEG shareholder who is happy with the MEG board deal with Cenovus,” said Waterous.
As reported by Reuters, MEG’s Christina Lake oilsands project’s long reserve life, low operating costs, and potential for production growth has made it an important asset.
While Cenovus has an oilsands property beside it, Waterous claimed that combining MEG’s Christina Lake oilsands project with Strathcona's operations in the region will provide similar benefits.
Strathcona’s new offer will expire on Oct. 20. Prior to the changes in Strathcona’s offer, the oil and gas producer’s bid was only $28.02 per share.
