Latest news with #WaterousEnergyFund
Globe and Mail
6 days ago
- Business
- Globe and Mail
Waterous fund would own more than half of company formed from Strathcona's takeover of MEG Energy
An investment fund led by Strathcona Resources Ltd.'s SCR-T executive chairman will control more than half of the shares of the oil company that would result from Strathcona's $5.9-billion takeover of MEG Energy Corp. MEG-T If Strathcona's hostile bid for the rival oil sands producer is successful, Adam Waterous's Waterous Energy Fund will acquire $662-million of stock in the combined company to put its stake at 51 per cent, according to details of the offer released in the formal bid document on Friday. WEF currently owns 79.6 per cent of Strathcona shares. Strathcona announced its unsolicited cash-and-stock offer for MEG on May 15, saying the two oil sands-producing entities are highly complementary in geography, operations, reserve-life indexes and profit margins. Why Canadian energy is a secret bargain, spurring a hostile takeover bid in the oil sands Mr. Waterous said MEG shareholders would benefit in three ways: through a 9 per cent premium over the value of their shares, as measured when the deal was announced, higher earnings and cash flow per share and an improvement in credit rating to investment-grade status, which will reduce the cost of capital. 'This is the financial Abominable Snowman – often talked about but never seen,' he said in an interview. He pointed out that WEF's participation in the deal, at a cost of $30.92 a share, would represent the largest equity investment in the Canadian oil patch in more than a decade. 'And we think we're going to get private-equity rates of return on that,' he said. Strathcona is offering MEG shareholders 0.62 of a Strathcona share and $4.10 in cash for each MEG share. The bid will remain open until Sept. 15. MEG shares were down 2 per cent at $24.11 on the Toronto Stock Exchange on Friday. Strathcona was up 2 per cent at $29.49, putting the value of its offer at $22.38, suggesting investors are still wagering on a higher offer. Analysts have speculated some of the country's large established oil sands companies may consider riding in as white knights. In a statement on Friday, MEG urged its shareholders not to tender to the Strathcona bid. The takeover target said it had formed a special committee of its board, which will evaluate the offer with the company's financial advisers. It plans to respond by June 16 days with a recommendation. It said it remains committed to its long-term strategy and is confident that it will create value. Officials declined to comment further. According to the bid circular, Strathcona amassed a 9.2 per cent interest in MEG through share purchases in the first and second quarters of this year. Mr. Waterous approached MEG director Jeff McCaig on April 10 to discuss the merits of a potential deal, and on April 28, sent a formal proposal outlining terms and conditions, including the price. On May 13, MEG Chairman Jim McFarland wrote back to say the company was not interested. Strathcona went public with its bid two days later. When they rejected the friendly approach, MEG's directors did not know that Strathcona was close to announcing a series of asset sales to focus its operations on heavy oil and reduce its debt, Mr. Waterous said. Just before announcing its bid, it sold Montney natural gas assets in two deals for total proceeds of $2.84-billion. 'MEG has not yet had the opportunity to evaluate our offer. So this is the first time. Now that they see we are such a lookalike business to them, a bigger look alike business, I think it will be much more straightforward for the board to be able to see the merits of the financial triple-jump,' he said.
CTV News
6 days ago
- Business
- CTV News
Strathcona formally launches takeover bid for oilsands peer MEG Energy
The MEG Energy Corp. logo is seen in this undated handout photo. THE CANADIAN PRESS/HO, MEG Energy *MANDATORY CREDIT* CALGARY — Strathcona Resources Ltd. has formally launched its takeover bid for fellow oilsands producer MEG Energy. Its offer, open until Sept. 15, comprises 0.62 of a common share of Strathcona and $4.10 in cash for each MEG share it doesn't already own. MEG said Friday that its board as well as legal and financial advisers will consider the offer. A special committee of independent directors will assist in that review. The target company is urging shareholders to take no action until it has made a recommendation, which it expects to do within 15 days. Also Friday, Strathcona announced an equity commitment letter with Waterous Energy Fund, whose CEO Adam Waterous is executive chairman of Strathcona. The fund owns almost 80 per cent of Strathcona shares, and the new investment is worth about $662 million. 'WEF's major further investment in Strathcona reflects our view that more than eight years into building Strathcona, our best years are in front of us. As part of the offer, we are asking MEG shareholders to join us as fellow shareholders in Strathcona and trust the Strathcona team as stewards of their capital,' Waterous said in a release Friday. 'We therefore believe it is important that we eat our own cooking, ensuring no one will be more focused on increasing Strathcona's value beyond current levels than WEF. We firmly believe Strathcona represents compelling value at this price with a large margin of safety, and that we and the partners in our fund will do very well over the long run.' Strathcona announced its ambitions to snap up MEG earlier this month. On a call with analysts at the time, Waterous said his company and MEG have assets so complementary they are like 'doppelgangers' or 'brothers from another mother.' Strathcona and MEG both extract bitumen using steam-driven techniques in eastern Alberta and don't have fuel refining or retail businesses like some bigger oilsands players. Shortly before the MEG bid was announced, Strathcona signalled its plans to become a pure-play heavy oil company when it announced the sale of its Alberta shale natural gas operations in three separate deals for a total of $2.84 billion. It also said it bought the Hardisty crude-by-rail terminal in Alberta for about $45 million. Strathcona shares rose more than two per cent to $29.42 in Friday trading on the Toronto Stock Exchange. MEG shares fell almost two per cent to $24.53. MEG's stock has been trading higher than the value of the bid, suggesting investors believe a better offer might come along. Analysts have said competing bids may come from oilsands majors like Cenovus Energy Inc., Canadian Natural Resources Ltd. or Imperial Oil Ltd. This report by The Canadian Press was first published May 30, 2025. Companies in this story: (TSX: MEG, TSX: SCR, TSX: CVE, TSX: CNQ, TSX: IMO) Lauren Krugel, The Canadian Press
Globe and Mail
20-05-2025
- Business
- Globe and Mail
MEG Energy could attract higher offers in wake of Strathcona's $5.9-billion bid, analysts say
Strathcona Resources Ltd.'s SCR-T $5.9-billion unsolicited takeover bid for MEG Energy Corp. MEG-T could just be the opening ante in a series of higher offers for the last of Canada's large pure-play oil sands producers. Canada's energy industry has doubled down on oil sands assets in recent years as U.S. and other foreign players retreated from the capital-intensive industry that has struggled with limited access to global oil markets. Sentiment has improved with last year's opening of the Trans Mountain pipeline expansion to the West Coast, which has shrunk the discount on oil sands-derived crude – and growing support nationally for the concept of new pipelines. Last week, Strathcona bid about $23.27 in cash and stock for MEG. A successful deal would make the suitor Canada's fifth-largest oil producer at around 219,000 barrels a day. Strathcona is controlled by Calgary-based Waterous Energy Fund, which is led by former investment banker Adam Waterous. Mr. Waterous has described the two businesses as highly complementary 'doppelgangers,' making it easy to combine them. However, analysts suggest there could be higher offers in the cards for MEG, which has yet to give a formal response to the bid. They cite a who's who of domestic producers as possible rivals. Greg Pardy, analyst with RBC Capital Markets, sees Cenovus Energy Inc. as the most logical acquisitor. Both companies have operations in the Christina Lake region of northeastern Alberta, which could translate into operational savings, he said. However, Cenovus has large expenditures under way to add its own production and improve performance at its U.S. refineries. That could be dealt with by selling some of its international assets, such as those in the South China Sea, Mr. Pardy wrote in a note to clients. He also floated Imperial Oil Ltd. as a possible white knight as MEG's assets would complement its own steam-assisted gravity draining oil sands operations. However, the company has significant spending on tap for its own projects in the Cold Lake area, he noted. Imperial Oil, the Canadian affiliate of Exxon Mobil Corp., has often been speculated as an acquirer of companies, but has rarely made large acquisitions. Travis Wood, analyst at National Bank Financial, said he believes Strathcona's offer for MEG Energy is low, arguing a bid for the company should reflect a takeover price of $24-$26 a share, based on 2026 financial estimates. An offer based on longer-range estimates and potential savings could lift that price tag to $28-$29.50 a share, but that cuts down the list of potential suitors, Mr. Wood wrote in a research report. Canadian Natural Resources Ltd. tops Mr. Wood's list, based on the likelihood of large costs savings stemming from the company's acquisition several years ago of the Canadian assets of Devon Energy Corp., which are in close proximity to MEG's operations. The company has for years increased its holdings in the oil sands with large deals, most recently last year's takeover of Chevron Corp.'s Canadian assets. Broadly, he expects more merger and acquisition activity in the Canadian oil patch, following on the heels of other takeovers, including Whitecap Resources Ltd.'s just-closed $6-billion takeover of Veren Energy. 'The Canadian energy sector has witnessed some interesting transactions so far this year, both from a corporate and asset-level transaction perspective, with what we believe is a goal to expedite, unlock and expand value for shareholders,' he wrote. He said ARC Resources Ltd. is another potential takeover target, based on its liquids-rich natural gas reserves in the Montney region. Oil sands producers covet such production as a blending agent that allows heavy crude to flow in pipelines.
Zawya
16-05-2025
- Business
- Zawya
Canadian oil producer Strathcona to launch $4.25bln hostile bid for MEG Energy
(Reuters) - Canadian oil and gas producer Strathcona said late Thursday it plans to launch a C$5.93 billion ($4.25 billion) hostile takeover bid for rival MEG Energy, aiming to create one of the country's largest oil sands companies. The all-cash-and-stock unsolicited offer would combine two of Canada's largest pure-play thermal oil sands operators, and make Strathcona Canada's fifth-largest oil producer. Strathcona said it first made an offer to MEG's board on April 28, but was turned down on May 13. Strathcona has already built a nearly 9% stake in MEG through market purchases earlier this year. It said it plans to formally file its offer in the next two weeks and is still open to talks with MEG's board. MEG said on Friday its board will review the offer and urged shareholders to take no action for now. Strathcona is offering 0.62 of its share and C$4.10 in cash for each MEG share, valuing the bid at C$23.27 per share — a 9.3% premium to MEG's last closing price. Desjardins analysts said the offer is highly unlikely to be accepted, adding that the "modest" premium would likely attract competing offers from larger oil sands players. Strathcona said it would fund the cash portion of the deal through a bridge loan from lenders. Strathcona's main stakeholder, Waterous Energy Fund, which owns nearly 80% of the company's shares, plans to increase its investment. If the deal goes through, MEG shareholders would own 37.8% of the combined company. Waterous would hold just over half, including the new shares. Strathcona said it was targeting C$175 million in annual cost savings, including lower spending on operations, capital, and interest. Strathcona's bid also comes after it recently sold its Montney assets for about C$2.84 billion and bought the Hardisty Rail Terminal to focus on core heavy oil operation.
Globe and Mail
16-05-2025
- Business
- Globe and Mail
Canadian oil producer Strathcona to launch $5.93-billion hostile bid for MEG Energy
Canadian oil and gas producer Strathcona SCR-T said late Thursday it plans to launch a $5.93-billion hostile takeover bid for rival MEG Energy MEG-T, aiming to create one of the country's largest oil sands companies. The all-cash-and-stock unsolicited offer would combine two of Canada's largest pure-play thermal oil sands operators, and make Strathcona Canada's fifth-largest oil producer. Strathcona said it first made an offer to MEG's board on April 28, but was turned down on May 13. Strathcona has already built a nearly 9 per cent stake in MEG through market purchases earlier this year. It said it plans to formally file its offer in the next two weeks and is still open to talks with MEG's board. MEG did not immediately respond to a request for comment. Strathcona is offering 0.62 of its share and $4.10 in cash for each MEG share, valuing the bid at $23.27 per share – a 9.3 per cent premium to MEG's last closing price. The company said it would fund the cash portion of the deal through a bridge loan from lenders. Strathcona's main stakeholder, Waterous Energy Fund, which owns nearly 80 per cent of the company's shares, plans to increase its investment. If the deal goes through, MEG shareholders would own 37.8 per cent of the combined company. Waterous would hold just over half, including the new shares. Strathcona said it was targeting $175-million in annual cost savings, including lower spending on operations, capital, and interest. Strathcona's bid also comes after it recently sold its Montney assets for about $2.84-billion and bought the Hardisty Rail Terminal to focus on core heavy oil operation.
