Canada’s Strathcona Resources supports MEG Energy in its process to explore potential mergers after MEG recommended that shareholders reject a $4.4 billion (C$6 billion) takeover offer from Strathcona.
Last month, Strathcona, MEG’s second-largest shareholder with about 9%, made an offer to acquire MEG Energy for the equivalent of some $4.4 billion in cash and stock. A deal would have turned the combined company into the fourth-largest oil producer among companies using team-assisted gravity drainage recovery technology in the oil sands. It would also have also resulted in the fifth-largest oil company in Canada overall, Strathcona said, positioning it for an investment-grade credit rating.
However, MEG Energy said earlier this week that its board of directors had determined that Strathcona’s unsolicited bid to acquire all of the issued and outstanding MEG shares is “inadequate, opportunistic, and NOT in the best interests of MEG or its shareholders.”
MEG warrants a premium valuation, which Strathcona’s offer fails to deliver, the company said. The board has authorized MEG to initiate a strategic review of alternatives with the potential to result in an offer superior to the company’s standalone plan.
In response to the rejected bid, Strathcona said on Friday that as MEG’s second-largest shareholder, it welcomes the MEG Board’s efforts to market-test the offer against other acquisition proposals. Strathcona agrees that the MEG Board has a duty to fully investigate each proposal for the business, including the offer.
Strathcona fully supports MEG “contacting other potential acquirers to determine if a superior transaction to Strathcona’s offer is available,” said Adam Waterous, Executive Chairman of Strathcona.
Strathcona continues to firmly believe its offer “provides a true win-win for MEG and Strathcona shareholders, uniting two heavy oil “pure plays” into a new Canadian oil champion, while delivering significant accretion to MEG and Strathcona shareholders on all key metrics,” the company said.
By Tsvetana Paraskova for Oilprice.com
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