6 days ago
Strathcona's hostile bid for MEG Energy called the 'largest investment in the Canadian oilpatch in a decade'
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The terms of the deal are the same as a proposal that was originally made to MEG in April, which was subsequently rejected by the company's board on May 13. MEG indicated at the time that it was not interested in pursuing a combination, according to Strathcona.
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In response to Strathcona's filing Friday, MEG urged shareholders to wait until the board could provide a formal recommendation.
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MEG's board has formed a special committee of independent directors to evaluate the offer, the company said Friday, noting that it would provide a recommendation within 15 days.
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Some MEG shareholders have taken the view that Strathcona's bid doesn't sufficiently recognize the quality of the oilsand firm's Christina Lake assets and the potential of its undeveloped holdings at the Surmont Project in the southern Athabasca region of Alberta.
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Waterous said the deal provides MEG shareholders with an immediate nine per cent premium on MEG's shares, stronger per-share earnings and cash flow, and the potential for a re-rating of Strathcona that would lower borrowing costs and boost its stock valuation.
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If the bid succeeds, MEG would be Strathcona's 11th major acquisition.
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Some MEG shareholders have said they're more than willing to throw their support behind a private-equity player with a track record for dealmaking.
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Cole Smead, chief executive officer of Smead Capital Management Inc., said agreeing to Strathcona's offer would give MEG shareholders a piece of Waterous' private-equity fund without paying any management or performance fees.
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'We just get to ride along as a public shareholder and we get to gain the benefits of his capital-allocation stewardship, and we don't pay any performance fees to him,' Smead said. 'There's a divide in the energy business between people who are good capital allocators and people who are not. Adam Waterous is one of the best.'
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Sayer Energy Advisors had been predicting a more subdued year for merger-and-acquisition activity in the Canadian upstream oil and gas sector compared to 2024, with total transaction values projected to be in the $15-billion range.
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Then Whitecap Resources Inc. and Veren Inc. (formerly Crescent Point Energy Corp.) announced their multi-billion-dollar merger in March, followed by nearly $4 billion more in M&A activity in the second quarter so far.
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'We're already higher than what we thought we were going to be for all of 2025,' Tom Pavic, Sayer Energy Advisors' president, said. 'And I'm not even counting (Strathcona's bid for MEG) because we don't know how this is going to shake out.'
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