Strathcona Resources Ltd. is defending its takeover bid of MEG Energy Corp.
Strathcona first announced its offer to take over all issued and outstanding shares of MEG it didn’t already own.
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MEG took the offer and formed a special committee to conduct a thorough evaluation of the offer. Following the review, the offer was deemed inadequate and shareholders were urged to reject the offer.
“Strathcona’s offer is inadequate by all reasonable measures and is not the right path forward for MEG shareholders,” said James McFarland, chairman of the MEG board.
The offer by Strathcona was 0.62 of a Strathcona share and $4.10 in cash per MEG share.
McFarland says this would expose shareholders to market risks.
“A combination with Strathcona would expose shareholders to inferior assets and significant capital markets risks,” he said. “Including a $6 billion overhang resulting from Waterous Energy Fund’s (WEF) 51 per cent ownership in the combined company, which would allow WEF investors to realize liquidity over time.”
In the press release, MEG’s board says it authorized the company to initiate a strategic review of alternatives.
“Strathcona is delighted the MEG board has accepted Strathcona’s recommendation to initiate a strategic alternatives process for the business and fully supports them contacting other potential acquirers to determine if a superior transaction to Strathcona’s offer is available,” said Adam Waterous, executive chairman of Strathcona.
Following the MEG response to the purchase, Stratchona put out a press release and a presentation wanting to correct what they called “a variety of errors and misleading statements” in the directors’ circular.
In the presentation regarding the purchase, Strathcona says the two companies have highly similar assets.
“Together, the companies are expected to form Canada’s fifth-largest oil producer, fourth-largest SAGD (steam-assisted gravity drainage) producer, and be among the largest holders of proved oil reserves in North America,” stated the presentation.
As part of the transaction, WEF committed to subscribe for subscription receipts representing 21.4 million shares of Strathcona. On June 27, WEF announced it had done just that, purchasing the 21.4 million shares.
Strathcona Resources already owns over nine per cent of current MEG shares.
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