Strathcona Resources Ltd. has ended its hostile takeover pursuit of MEG Energy Corp., clearing the way for a rival friendly bid from Cenovus Energy Inc.
The move comes two days after Cenovus sweetened its offer for MEG, its neighbour in Alberta’s oilsands. Strathcona also has operations in the region.
“As a result of the revised arrangement agreement between the MEG board of directors and Cenovus Energy Inc., Strathcona believes the conditions to its offer, or any reasonably improved offer, are no longer capable of being satisfied,” Strathcona said in a release Friday.
Strathcona owns 14.2 per cent of MEG and had been offering 0.80 of one of its shares for each MEG share it did not already own.
The latest Cenovus offer announced Wednesday values MEG at $8.6 billion, including assumed debt and is made up of half equity and half stock. Its earlier offer had been three-quarters cash, and some MEG shareholders had pushed to get a bigger slice of the post-takeover company.
“While Strathcona is disappointed with this outcome, it is pleased that its actions, along with those of its fellow MEG shareholders, delivered something which the MEG board could not, namely a more equitable transaction with Cenovus which allows MEG shareholders to participate more meaningfully in future upside,” Strathcona said.
“Strathcona would like to thank its shareholders for their support throughout the MEG process, as well as the many MEG shareholders it received support from and tendered their shares.”
Earlier this week, MEG and Cenovus announced they had amended the terms of their existing standstill agreement, allowing Cenovus to buy about 10 per cent of MEG’s shares.
Strathcona called that move “without precedent in the Canadian public markets and the latest in a series of anticompetitive actions taken by the MEG board.”
“Strathcona has concluded that the MEG Board’s ability to continuously extend the Cenovus meeting date, and continuously allow Cenovus to purchase and vote additional shares, makes an improved offer for MEG impractical and not in the best interests of Strathcona shareholders.”
Strathcona plans to pay a special distribution of $10 per share to all of its shareholders, as it had promised if its MEG takeover didn’t pan out. It requires two-thirds shareholder approval at a meeting scheduled for Nov. 27.
The company said that following the sale of MEG, it will be the only pure-play oil company in North America producing more than 50,000 barrels per day without a mine or refineries. It, MEG and Cenovus all extract oilsands bitumen using steam-assisted gravity drainage.
MEG shareholders are to vote on the amended Cenovus offer on Oct. 22.
