Strathcona Resources, which is controlled by private equity firm Waterous Energy Fund, has tabled a CAD5.93bn ($4.25bn) cash-and-scrip offer for MEG Energy, targeting a merger of two of Canada’s largest pure-play thermal-oil-sands operators, according to a report by Reuters.
If completed, the hostile proposal of 0.62 Strathcona share plus CAD4.10 in cash for each MEG share, equating to CAD23.27 a share and a 9.3% premium to MEG’s prior close, would propel the bidder to fifth place among the nation’s crude producers.
Strathcona has quietly accumulated almost 9% of MEG and says a formal circular will follow within a fortnight after its 28 April approach was rebuffed.
A successful deal would deliver combined output of circa 295,000 bbl/d and an estimated CAD175m in annual synergies; MEG investors would hold 37.8% of the enlarged vehicle, with the cash leg underwritten by a bridge facility.
The bid arrives on the heels of Strathcona’s exit from the Montney gas play and acquisition of western Canada’s largest crude-by-rail terminal, signalling a pivot to pure-play heavy oil.
Executive chair Adam Waterous argues scale is essential as Canada seeks to diversify export routes beyond the US. Analysts, however, expect the move to flush out rival offers from larger oil-sands incumbents.
MEG’s board has advised holders to take no action while it reviews the approach.
