MEG-Cenovus deal gets approval after delay in key shareholder vote
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After three vote delays, two sweet bids and countless other twists and turns, MEG Energy Corp. shareholders have given their blessing to an $8.6 billion acquisition by Cenovus Energy Inc.
MEG Chairman James McFarland told a special meeting Thursday that more than 86 percent of shares voted in favor of the deal, well above the two-thirds majority needed to pass it.
He thanked shareholders for their “patience over the past few weeks.”
The meeting was originally scheduled for October 9, but was postponed by two weeks when Cenovus first changed its proposal. It was then postponed for another week when it appeared there was still not enough shareholder support for the proposal to pass. Then last week, a meeting to consider the proposal – which was sweetened for the second time – was postponed until Thursday because of a last-minute regulatory complaint.
Richard Mason, Executive Fellow at the University of Calgary’s School of Public Policy, explains what the recent deal between Cenovus Energy and MEG Energy means for Canada’s oil and gas industry.
The saga began in April when another company, Strathcona Resources Ltd., approached the MEG board with a cash-and-stock takeover bid. Strathcona rejected and took the offer directly to MEG shareholders a few weeks later.
In June, MEG’s board called the bid “opportunistic” and urged shareholders to reject it as it launched a review to find a better offer. Strathcona acting president Adam Watrous accused MEG of refusing to engage and taking a stance “other than Strathcona”.
In August, MEG announced that its board had accepted a friendly takeover offer from Cenovus. The following month, Strathcona based its offer entirely on stock, arguing that the structure would give investors greater opportunity to profit from future growth.
Cenovus said it is paying attention to shareholder feedback, increased my bid and offered more equity shares in early October.
Strathcona left his bid A few days later, he said that the terms of his proposal could no longer be met.
Last week, Cenovus again increased its offer and Strathcona agreed to vote its 14.2 percent MEG stake in favor of the deal.
The same day, those companies announced that Strathcona had agreed to purchase the Vaughan Thermal heavy oil operation in Saskatchewan and certain undeveloped properties in western Saskatchewan and Alberta from Cenovus for up to $150 million.
That side-deal was the basis for the most recent vote delay, as McFarland said more time was needed to disclose information to MEG shareholders. Cenovus CEO John McKenzie later said that a former MEG employee with 4,000 shares had filed an unspecified complaint.
Cenovus and MEG own adjacent oilsands properties on Christina Lake south of Fort McMurray, Alta., and the companies have touted the cost-savings and efficiencies that will result from joining forces. Strathcona also has steam operations in the area.
The deal will add 110,000 barrels of daily oil sands production to Cenovus’ portfolio, bringing it to 720,000 boe/d. Cenovus said production could rise to 850,000 boe/d in 2028.
