Strathcona blasts MEG Energy’s ‘weak board’ as company chooses $7.9B Cenovus deal

Cenovus Energy logos are on display at the Global Energy Show in Calgary, Alta., Tuesday, June 7, 2022. THE CANADIAN PRESS/Jeff McIntosh

CALGARY — MEG Energy Inc. has accepted a friendly cash-and-stock takeover offer from oilsands neighbour Cenovus Energy Inc. worth $7.9 billion, including debt, but Strathcona Resources, the hostile bidder MEG has spurned, is not ready to give up its pursuit. 

A special committee reviewed all available options to boost shareholder value after Strathcona made its takeover attempt this spring, MEG chairman James McFarland said Friday. 

“After considering the Strathcona unsolicited offer, engaging with multiple parties on proposals, and assessing them against MEG’s stand-alone plan, the special committee and the MEG board unanimously concluded that the proposed transaction with Cenovus represents the best strategic alternative,” McFarland said in a statement.

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Strathcona executive chairman Adam Waterous said MEG’s board has agreed to a “take-under,” as the Strathcona bid, open until Sept. 15, is worth a dollar more per share than what Cenovus has put forward. 

Waterous said his company’s cash-and-stock offer, which includes a higher equity proportion than the Cenovus offer, would mean more upside opportunity for MEG shareholders. 

“Hats off to Cenovus for preying on a weak board which owns almost no shares in the business and clearly adopted an ‘Anybody But Strathcona’ view as a result of Strathcona putting the company in play,” Waterous said in an email. 

“I am sure Cenovus felt that negotiating with MEG’s board was like taking candy from a baby.”

Strathcona is almost 80 per cent owned by Waterous Energy Fund, which Waterous runs. 

Cenovus had been floated by industry watchers as the most likely company to launch a competing bid because it and MEG have side-by-side oilsands properties at Christina Lake south of Fort McMurray, Alta., that could be more efficient together. 

Cenovus said the deal represents a unique opportunity to acquire about 110,000 barrels per day of production adjacent to its operations. 

It’s also predicting annual cost savings and efficiencies of $150 million a year in 2026 and 2027 and $400 million a year in 2028 and beyond if the deal goes through. 

On a conference call with analysts Friday, Cenovus CEO Jon McKenzie called MEG one of the top producers using the steam-assisted gravity drainage, or SAGD, method to extract bitumen from deep underground. In SAGD, the bitumen is heated up and drawn to the surface through wells instead of mined in an open pit. 

“We are very excited to leverage the best practices of both companies to continue to drive value. We can see several areas where MEG has advanced new and innovative approaches, and we’ll be evaluating to see what we can implement across both Christina Lake assets, as well as extending to the rest of our SAGD portfolio,” McKenzie said. 

“At Cenovus, all of us remain committed to pushing the boundaries of SAGD innovation and this combination brings together two of the best performing producers in this space.”

A takeover of MEG would further shrink the number of independent players active in the oilsands and increase an already dominant footprint for Cenovus, which took over Husky Energy for $3.8-billion in 2021. 

Cenovus says a combination with MEG would bring its oilsands production to 720,000 barrels per day, growing to 850,000 in 2028. The Alberta Energy Regulator says total oilsands bitumen production last year was almost 3.6 million barrels a day. 

Under the agreement, MEG shareholders can receive $27.25 in cash or 1.325 Cenovus common shares for each MEG share, subject to a limit of $5.2 billion in cash and 84.3 million Cenovus shares available.

On a fully pro-rated basis, the offer per MEG share represents $20.44 in cash and 0.33125 of a Cenovus share. 

MEG shares closed at $27.56 on the Toronto Stock Exchange on Thursday, making the deal a “modest take-under,” said Desjardins Securities analyst Chris MacCulloch in a research note. 

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Strathcona’s offer includes a combination of 0.62 of a Strathcona share and $4.10 in cash per MEG share. Based on Strathcona’s closing share price of $38.83 on Thursday, its bid is worth $28.17 per MEG share.

“We believe the Cenovus offer should prove more attractive to MEG shareholders given it includes a large cash component while allowing them to participate in the superior synergy potential of the combined entity through a more liquid equity component,” MacCulloch wrote. 

The deal must be approved by a two-thirds majority of MEG shareholders in a vote set for October. 

MacCulloch said Cenovus has left itself the financial room to sweeten the deal before then if needed and called the proposed transaction a “strategic masterstroke.” 

When it announced its takeover attempt in May, Strathcona disclosed that it holds a 9.2 per cent stake in MEG. 

Waterous said if a majority of MEG shareholders don’t tender to the Strathcona bid next month, it plans to vote against the Cenovus offer. It also said it will follow through on its plan to return about $10 per share to its investors through a special dividend by year end if it is unsuccessful. 

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Lauren Krugel, The Canadian Press

This report by The Canadian Press was first published Aug. 22, 2025.