CALGARY – Cenovus Energy Inc. is raising its bid for MEG Energy Corp. and ponying up more stock after investors in the target company pushed for a bigger ownership slice of the oilsands giant if the takeover succeeds.
The amended offer announced Wednesday — the day before a MEG shareholder vote on the previous bid — values MEG at about $8.6 billion, including assumed debt, up from its earlier value of $7.9 billion.
The earlier offer comprised 75 per cent cash and 25 per cent shares. Now, Cenovus is offering a 50-50 split.
The deadline for MEG shareholders to submit their proxy votes for the previous offer passed on Tuesday morning. It needed two-thirds of shares to be voted in favour in order to be approved.
“We received support from the majority of MEG’s shareholders for our transaction. However, many MEG shareholders indicated that they would prefer to receive greater Cenovus share consideration, so that they can more fully participate in the upside of the combined company,” Cenovus chief executive Jon McKenzie said in a statement.
“We listened to these comments and have changed the consideration under our offer to a maximum of 50 per cent cash and 50 per cent Cenovus shares, while increasing the aggregate purchase price.”
Cole Smead, CEO and portfolio manager at Smead Capital Management, said it appears the initial Cenovus offer was not going to succeed, so it had to be sweetened to “have a chance.”
“Who wins these battles is who sees the most value,” said Smead. “And whoever sees the value is always willing to pay the highest price.”
The Cenovus offer faces a rival all-stock bid from Strathcona Resources Ltd., which already holds a 14.2 per cent interest in MEG. Strathcona is offering 0.8 of a share for each MEG share it doesn’t already own.
Based on Tuesday’s closing share prices, the Cenovus bid is worth about $29.80 per share on a fully pro-rated basis, while Strathcona’s is worth $29.67.
The shareholder meeting on the Cenovus bid has been postponed until Oct. 22. The new proxy deadline is now Oct. 20, the same day the Strathcona offer expires.
The MEG board urged shareholders to support the Cenovus offer.
Cenovus and MEG have side-by-side oilsands properties at Christina Lake, south of Fort McMurray, Alta., while Strathcona also has operations in the region.
“Since the initial Cenovus transaction was announced, there has been strong recognition of the industrial logic and the synergy potential between MEG and Cenovus,” said MEG chief executive Darlene Gates in a press release Wednesday.
“The amending agreement enables MEG shareholders to benefit from greater upside through a significant increase to the proportion of share consideration, while also raising the initial transaction consideration.”
MEG was put in play after Strathcona approached its board with a takeover offer in April. Strathcona was rebuffed and took the offer directly to MEG shareholders weeks later.
At the time, the Strathcona offer was made up of cash and stock and worth $28.02 per share. In June, MEG’s board called the bid “opportunistic” and urged shareholders to reject it as it launched a review to find a superior offer.
Analysts pinpointed Cenovus as the most logical competing bidder. That prediction bore out in August, when MEG announced its board had accepted a friendly takeover offer from Cenovus.
Last month, Strathcona amended its offer to be based entirely on stock.
Analysts at Desjardins had previously said Cenovus had the financial room to top Strathcona.
“Following the material sweetening of the acquisition proposal, which Cenovus explicitly stated represents its ‘best and final offer for MEG,’ we expect MEG shareholders to approve the transaction at the upcoming shareholder vote.”
Smead said MEG is a “truly great” pure-play oilsands producer that has historically attracted investors optimistic about the future of oil. The most bullish ones were the most disappointed in Cenovus’ initial offer, he said.
Smead owns 1.1 million shares in MEG, as well as positions in Cenovus and Strathcona.
On Wednesday, Smead said it’s “pointless” to entertain the new Cenovus offer until shareholders see what Strathcona counters with.
Smead said it’s not a question of whether Strathcona will increase its offer, but how many steps it will take to get it past the finish line. In one scenario, Strathcona could raise its bid, have it countered by Cenovus, and then sweeten it again.
Another scenario would be what Smead calls a “bear hug,” which would see Strathcona putting forward “such a price that it kind of knocks people out of their chair … It would overwhelm you.”
This report by The Canadian Press was first published Oct. 8, 2025.
Companies in this story: (TSX:MEG, TSX:CVE, TSX:SCR)
