MEG urges investors to reject Strathcona's sweetened bid, backs Cenovus deal (updated)

Strathcona Resources

15/09/2025 12:20

Adds bullets; Adds Strathcona comment in paragraph 7-8

Strathcona holds 14.2% stake in MEG, opposes Cenovus deal

Cenovus CEO McKenzie has said no plan to increase MEG offer

MEG shareholders to vote on Cenovus deal Oct. 9

Sept 15 (Reuters) - Canadian oil sands producer MEG Energy MEG.TO on Monday urged shareholders to reject the sweetened takeover bid from its majority stakeholder Strathcona Resources SCR.TO, and reaffirmed support for sale to Cenovus Energy CVE.TO.

"The revised Strathcona offer remains fundamentally unattractive," said James McFarland, chair of MEG's board, citing exposure to inferior assets, an overvalued Strathcona share price and governance risks.

The battle for Canada's last major pure-play oil sands company highlights a consolidation, leaving the sector dominated by few big Canadian players following the pullback of foreign firms over the past decade.

MEG's Christina Lake oil sands project has become a prized asset, with its long reserve life, low operating costs and significant potential for production growth, making it one of the few large-scale expansion opportunities.

The takeover saga began in May when Strathcona launched a C$5.93 billion ($4.29 billion) hostile bid for MEG Energy. However, Cenovus countered with a C$7.9 billion cash-and-stock agreement to acquire MEG.

Since then, Strathcona has raised its stake in MEG to 14.2%, aiming to vote against the Cenovus deal, and earlier this month sweetened its original offer to C$30.86 per share, compared with Cenovus' nearly C$28 bid.

Strathcona's offer is "clearly superior," the company's executive chair Adam Waterous said Monday. MEG's board is simply repeating previous criticisms of the offer, which Strathcona has already publicly addressed, he said.

"MEG investors face two clear choices: exit largely for cash to Cenovus at a discount to Strathcona’s offer or take shares in Strathcona and participate in the upside of the combined company," Waterous said in an email to Reuters.

Earlier this month, Strathcona announced plans for a C$2.14 billion special distribution to shareholders in the fourth quarter, equating to about C$5.22 per share if their sweetened bid is successful.

Cenovus CEO Jon McKenzie told Bloomberg News last week the company does not plan to raise its offer for MEG despite Strathcona's higher bid.

Cenovus did not immediately reply to Reuters' request for comment Monday.

MEG shareholders are expected to vote on the Cenovus deal on October 9.

($1 = 1.3822 Canadian dollars)

(Reporting by Tanay Dhumal in Bengaluru and Amanda Stephenson in Calgary; Editing by Vijay Kishore and Chizu Nomiyama )

((Amanda.Stephenson@thomsonreuters.com; Tanay.Dhumal@thomsonreuters.com))