Cenovus Energy Inc., a major oil sands producer, has entered into a definitive agreement to acquire MEG Energy Corp. for a total value of $7.9 billion, including debt. The transaction will be financed 75% in cash and 25% in Cenovus shares, offering MEG shareholders the option to receive cash or stock, subject to proration.
Under the terms of the deal, each MEG shareholder may receive either CAD 27.25 in cash or 1.325 Cenovus shares, capped at $5.2 billion in cash and 84.3 million shares issued. On a fully prorated basis, this represents approximately CAD 20.44 in cash and 0.33125 Cenovus share per MEG share.
Asset consolidation and expected synergies
The acquisition will reinforce Cenovus as the leading steam-assisted gravity drainage (SAGD) oil sands operator, with combined production exceeding 720,000 barrels per day. The adjacent and complementary assets located in Christina Lake will be integrated, enabling optimized development of the region.
The company expects to generate more than $400 million in annual synergies starting in 2028, including $150 million in the near term. These benefits will stem from pooled technical expertise, reduced operating costs, and integrated development projects.
Financial structure and impact on shareholders
The financing plan includes a $2.7 billion term loan and a $2.5 billion bridge facility, which Cenovus intends to replace with a bond issuance. The company will maintain liquidity of more than $8 billion through available credit facilities and cash reserves.
Pro forma net debt is estimated at approximately $10.8 billion, representing less than one times adjusted funds flow at current strip pricing. Management also plans to revise its shareholder returns framework based on debt levels, with progressive targets between $6.0 and $4.0 billion.
Approvals and closing timeline
The agreement was unanimously approved by the boards of directors of both companies. Closing is expected in the fourth quarter of 2025, subject to customary regulatory approvals and MEG shareholder approval. The transaction is not subject to any financing condition.
Financial advisors to Cenovus are Goldman Sachs Canada Inc. and CIBC Capital Markets, while legal counsel is provided by McCarthy Tétrault LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP.
