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Cenovus raises offer for MEG Energy to $29.80 per share with new mixed structure

Cenovus Energy modifies terms of its acquisition of MEG Energy by increasing the offer value and adjusting the cash-share split, while reporting record third-quarter results.

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Cenovus Energy Inc. announced an increased public acquisition offer for MEG Energy Corp., with a revised valuation of approximately $29.80 per share. The transaction now proposes a mixed payment composed equally of cash and Cenovus common shares, up to a maximum of $3.8bn in cash and 157.7 million shares. This revised proposal represents approximately $14.75 in cash and 0.620 Cenovus share per MEG share.

The new structure, formalised through an amended agreement, replaces the original terms agreed in August. It responds to requests from MEG shareholders for greater participation in the merged entity. This final offer, described as “best and final” by Cenovus management, represents a $1.32 per share increase over the initial proposal.

Regulatory approval and updated timetable

Canadian and US authorities have approved the transaction, including the Canadian Competition Bureau and the United States Federal Trade Commission. Cenovus also amended a standstill agreement with MEG, allowing it to acquire up to 9.9% of MEG’s outstanding shares prior to completion.

The special shareholder meeting initially scheduled for October 9 has been postponed to October 22 to allow shareholders time to assess the amended offer. MEG shareholders may choose between cash, shares, or a combination of both, in accordance with the amended terms.

Record third-quarter performance

Operationally, Cenovus achieved a record quarterly production of 832,000 barrels of oil equivalent per day (boe/d), including 640,000 barrels per day (b/d) from its Oil Sands segment. Downstream crude throughput reached 712,000 b/d, including 606,000 b/d in the United States, corresponding to a utilisation rate of 98.8%.

The company finalised the sale of its 50% stake in WRB Refining LP to Phillips 66 for $1.8bn, with proceeds received on October 1. Cenovus’s net debt decreased from $5.3bn to approximately $3.5bn after receiving the transaction proceeds.

Large-scale share buyback

In September, Cenovus repurchased approximately 21.5 million of its own shares for $512mn. In total, for the third quarter, share repurchases reached 40.4 million shares for $900mn. With net debt below its long-term target of $4bn, the company plans to continue accelerated share repurchases in the coming quarters.

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