Strathcona Resources Ltd. has decided to withdraw its hostile takeover bid for MEG Energy Corp., allowing Cenovus Energy Inc. to proceed with its friendly offer. The decision was made following Cenovus’s improved bid for MEG, which is located in Alberta’s oilsands, mirroring Strathcona’s operations in the same area.
In a statement released on Friday, Strathcona stated that it no longer believes the conditions for its offer to be met due to the revised agreement between MEG’s board and Cenovus. Strathcona, which holds a 14.2% stake in MEG, had proposed exchanging 0.80 of its shares for each MEG share it didn’t already own.
Cenovus recently revised its offer for MEG to $8.6 billion, comprising equal parts of equity and stock, compared to its previous cash-heavy offer. This adjustment was made in response to some MEG shareholders seeking a more substantial stake in the post-takeover entity.
While expressing disappointment over the turn of events, Strathcona acknowledged the improved terms offered by Cenovus, which it believes will benefit MEG shareholders. The company expressed gratitude to its own shareholders and other MEG investors for their support.
Earlier in the week, MEG and Cenovus announced modifications to their standstill agreement, allowing Cenovus to acquire approximately 10% of MEG’s shares. Strathcona criticized this move, labeling it as unprecedented in the Canadian markets and accusing MEG’s board of engaging in anticompetitive practices.
Strathcona has decided to distribute a special payment of $10 per share to its shareholders, as previously pledged in the event of the MEG takeover not materializing. The company plans to seek shareholder approval for this distribution at a meeting scheduled for November 27.
Once the sale of MEG is finalized, Strathcona will become the sole pure-play oil company in North America producing over 50,000 barrels per day without mines or refineries. All three companies—Strathcona, MEG, and Cenovus—utilize steam-assisted gravity drainage for extracting oilsands bitumen.
MEG shareholders are set to vote on the revised Cenovus offer on October 22.
