Cenovus prepares possible rival offer with MEG’s deadline approaching and Strathcona’s bid rejected
A bidding war may be unfolding over MEG Energy Corporation, with Cenovus Energy reportedly preparing a competing offer ahead of a Monday deadline set by MEG for all bids, as reported by the Financial Post.
The move sets up a possible challenge to Strathcona Resources’ $6bn cash-and-stock offer, which MEG’s board has already rejected.
MEG, valued at $6.8bn on the TSX as of July 24, called Strathcona’s bid “inadequate, opportunistic, and not in the best interests of MEG or its shareholders.”
According to BNN Bloomberg, MEG formally opposed the bid on June 16 and launched a strategic review of alternatives — effectively signalling it was open to rival offers.
Cenovus is said to be seeking financing for its offer but has not confirmed whether it will proceed.
Julian Klymochko, CEO and chief investment officer at Accelerate, said in an interview with BNN Bloomberg that “there could be a bit of a bidding war,” and noted that “the stronger party here could win.”
He also described Cenovus as a potential “white knight,” offering a more amicable path forward than Strathcona’s unsolicited proposal.
Klymochko highlighted that in 2018, Husky Energy made an unsuccessful $6.4bn hostile bid for MEG. Husky was later acquired by Cenovus in a $23.6bn deal.
“There’s a lot of synergies there because the assets really line up,” he said.
RBC analysts previously called Cenovus “the most logical fit” to acquire MEG, pointing to overlapping operations in the oilsands of northeastern Alberta and potential for cost reductions, as reported by the Financial Post.
While Cenovus is still managing debt from earlier acquisitions, including its $3.8bn merger with Husky in 2021, RBC Capital Markets estimated the company’s net debt at $5.96bn as of June 30.
Cenovus is aiming to lower that figure to $4bn.
Klymochko also drew parallels to Suncor’s 2016 hostile acquisition of Canadian Oil Sands for $6.6bn.
In that case, the bidder raised its offer to secure a friendly agreement after other suitors failed to emerge.
He said a similar dynamic could play out with MEG, though Strathcona “is going up against a much larger, much more financially competitive interloper in Cenovus.”
Strathcona stated earlier this month that MEG’s board has refused to engage. Its offer remains open until September 15.
