Cenovus Energy increases stake in MEG Energy before merger vote
Cenovus Energy announced on Tuesday that it had purchased approximately 21.7 million MEG Energy common shares ahead of a vote to merge the two companies. This will strengthen its position in preparation for acquiring one of Canada's largest pure-play oil and sands firms.
Cenovus acquired approximately 8.5% of MEG’s 254.4 millions outstanding shares on October 8 and could purchase up to 9,9% of MEG’s shares before the merger vote.
Cenovus has submitted a bid for C$8.6 Billion ($6.11 Billion), including debt. However, at least two thirds of investors must support the deal to make it happen.
MEG's shareholders meeting was postponed from 9 October to 22 October to give investors more time to examine the revised Cenovus proposal.
Cenovus increased its bid earlier this month to knock Strathcona Resources from the MEG race.
Cenovus has also changed its deal structure. It now offers a 50-50 mixture of cash and stock. Previously, it offered 75% cash, and 25% shares. This gives MEG shareholders a higher upside potential in the combined company.
The transaction is expected to be completed in the first quarter of 2025.
Strathcona's months-long struggle with Cenovus over MEG has ended.
The takeover drama began in May, when Strathcona made a hostile offer of C$5,93 billion for MEG. Cenovus responded with a C$7.9-billion cash-and stock-offer in August.
MEG's Christina Lake project is a valuable asset because of its low operating costs, long life reserves and the potential to grow production.
After the departure of most foreign firms over the last decade, this is one of only a few large-scale opportunities for expansion in Canada's Oil Sands.
(source: Reuters)