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MEG Energy Corp.’s board turned down Strathcona Resources Ltd.’s sweetened offer to buy the oil sands producer, recommending that shareholders stick with a rival offer from Cenovus Energy Inc.
Strathcona, controlled by former investment banker Adam Waterous, last week offered 0.8 of a share for each share of MEG, valuing the Calgary-based target at around C$7.6 billion ($5.5 billion), based on Friday’s closing price.
The new offer is about 10% higher than Strathcona’s original takeover bid made in May and tops the price Cenovus agreed last month to pay for MEG. But it’s still inferior to Cenovus’s bid, which is mostly cash, MEG said.
“The revised Strathcona offer remains fundamentally unattractive for MEG shareholders because it fails to address or adequately compensate for the significant risks embedded in Strathcona shares,” MEG Chair James McFarland said in a statement. “MEG shareholders would be exposed to inferior assets, an unproven track record, an overvalued Strathcona share price, significant overhang risk, and governance risk.”
Strathcona says it owns 14% of MEG, and Waterous has pledged to vote his shares against the Cenovus deal when it comes before shareholders on Oct. 9. Strathcona’s own new offer expires on Oct. 20.
Cenovus Chief Executive Officer Jon McKenzie ruled out raising his company’s offer for MEG in an interview on Sept. 10.
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