Cenovus unveils $7.9-billion white-knight bid for MEG Energy

MEG Energy's Christina Lake thermal oilsands project, seen in 2013. (Credit: MEG Energy)

Cenovus Energy Inc. unveiled a $7.9-billion white knight bid for MEG Energy Corp. on Friday, a cash-and-stock deal that has the blessing of MEG’s board after it rejected a hostile takeover attempt by Strathcona Resources Ltd.

The oilsands major is offering $20.44 in cash plus 0.33 of a Cenovus share for each MEG share, with an implied value of $27.25 per share of MEG, representing a 33 per cent premium to MEG’s pre-bid share price, but a slight discount to its current price.

MEG called it “the best strategic alternative” to either Strathcona’s bid or the company’s standalone plans, noting its board unanimously supports the deal, although shareholders will ultimately make the decision whether to accept Cenovus’ offer.

“This strategic transaction with Cenovus accelerates and de-risks the value embedded in our compelling standalone plan. I am extremely proud of the MEG team, whose focus and execution around our world-class assets positioned us to deliver this positive outcome for shareholders,” MEG chief executive Darlene Gates said in a statement.

“Through the process, it became clear that bringing together MEG and Cenovus’s Christina Lake assets is a unique opportunity for synergy realization that will maximize the value of the resource for the benefit of its stakeholders.”

MEG’s shareholders will vote on the deal at a special meeting in early October, with the law requiring approval by at least two-thirds of the votes cast.

In the meantime, the clock is still ticking on Strathcona’s unsolicited offer of $4.10 in cash plus 0.62 of a Strathcona share for each MEG share, representing a total implied value of $28.17 per MEG share based on Thursday’s market closing price.

Strathcona’s offer remains open until Sept. 15, though MEG on Friday said it is continuing to urge shareholders to reject the bid.

Cenovus is set to hold a conference call Friday morning to discuss details of the deal first reported by the Financial Post.

“This transaction represents a unique opportunity to acquire approximately 110,000 barrels per day of production within some of the highest quality, longest-life oilsands resources in the basin, which sits directly adjacent to our core Christina Lake asset,” Cenovus chief executive Jon McKenzie said in a statement.

“The magnitude of synergies that we have identified makes this a compelling value creation opportunity for Cenovus shareholders. The team at MEG has done a fantastic job developing these assets, and we look forward to leveraging our combined expertise and scale to drive additional value for many years to come.”

• Email: [email protected]