Strathcona Resources Ltd. has decided to withdraw its hostile bid for MEG Energy Corp., allowing Cenovus Energy Inc. to proceed with its friendly takeover offer. This move follows Cenovus enhancing its bid for MEG, a fellow player in Alberta’s oilsands, just two days prior. Strathcona, which also operates in the same region, cited the revised agreement between MEG’s board and Cenovus as the reason for abandoning its pursuit, stating that the conditions for its offer were no longer feasible.
Having a 14.2% stake in MEG, Strathcona had proposed exchanging 0.80 of its shares for each MEG share not already owned. In contrast, Cenovus’s latest offer, revealed on Wednesday, values MEG at $8.6 billion, including debt, with a split of half equity and half stock. This revised bid was a shift from Cenovus’s earlier predominantly cash offer, which had prompted some MEG shareholders to seek a greater share in the post-takeover entity.
Expressing disappointment over the outcome, Strathcona acknowledged the role of its shareholders and others in facilitating a more equitable deal with Cenovus compared to the previous MEG board’s arrangement. Meanwhile, MEG and Cenovus modified their standstill agreement earlier in the week to allow Cenovus to acquire approximately 10% of MEG’s shares, a move criticized by Strathcona as unprecedented and anticompetitive.
As part of its contingency plan, Strathcona intends to distribute a special payment of $10 per share to its shareholders as pledged in case the MEG takeover bid fell through. The proposal is subject to two-thirds shareholder approval at a meeting scheduled for Nov. 27. Following the divestment of MEG, Strathcona anticipates becoming the sole oil-focused company in North America producing over 50,000 barrels per day without mines or refineries. All three companies, including MEG and Cenovus, utilize steam-assisted gravity drainage for extracting oilsands bitumen. MEG shareholders are set to vote on the revised Cenovus offer on Oct. 22.