Waterous Energy Fund-backed Strathcona Resources has launched a $4.25bn hostile takeover bid for MEG Energy, aiming to merge two of Canada’s largest pure-play thermal-oil-sands producers into a national heavyweight.

The unsolicited offer values MEG at CAD5.93bn, equivalent to CAD23.27 per share—a 9.3% premium to its previous close. Strathcona is offering 0.62 of its own shares plus CAD4.10 in cash per MEG share. The bid is underpinned by a bridge facility and would see MEG shareholders retain 37.8% ownership in the enlarged entity.

Strathcona has already built a nearly 9% stake in MEG and intends to proceed with a formal circular after its 28 April approach was rejected. A successful transaction would boost combined output to approximately 295,000 barrels per day and generate an estimated CAD175m in annual synergies.

The bid follows Strathcona’s strategic shift towards pure-play heavy oil, including its exit from the Montney gas play and acquisition of western Canada’s largest crude-by-rail terminal.

“Scale is critical as Canada seeks to diversify its export routes beyond the US,” said Adam Waterous, Executive Chair of Strathcona.

The deal could draw rival offers from larger oil-sands incumbents. MEG’s board is currently evaluating the bid and has advised shareholders to take no action at this stage.

Source: Reuters

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