Oil sands producer MEG Energy Corp. MEG-T has delayed a shareholder meeting on a proposed $8.6-billion takeover from Cenovus Energy Inc. CVE-T to give its suitor more time to round up votes for the offer.
On Tuesday, MEG announced a vote scheduled for Wednesday, Oct. 22, has been pushed back to Oct. 30, at Cenovus’s request. The deadline for submitting proxies has been extended to Oct. 29.
Cenovus needs approval from 66.6 per cent of MEG shareholders to win control of the company, which has Alberta oil sands properties adjacent to its own.
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MEG said in a press release that Cenovus had support from approximately 63 per cent of the MEG shareholders when it requested the vote be postponed.
MEG said Strathcona Resources Ltd., which owns a 14-per-cent stake in MEG and recently dropped its own hostile offer for the company, is assumed to have voted its shares against the deal.
MEG and Cenovus declined further comment on the delay in the meeting. MEG, Cenovus and Strathcona are all based in Calgary.
Cenovus may not be able to win the votes it needs to close the takeover, said Bank of Nova Scotia analyst Kevin Fisk.
“In our view, there is a risk that the transaction will not be approved,” Mr. Fisk said in a report Tuesday.
“We view the proposed transaction as positive for Cenovus and MEG shareholders and would expect a negative share price reaction if the transaction does not proceed,” he added.
MEG’s share price closed down 29 cents or 1 per cent at $28.98 on the Toronto Stock Exchange, while Cenovus shares fell by 2.1 per cent.
This is the second time MEG has delayed a shareholder vote on the Cenovus bid. The company also postponed a meeting scheduled for Oct. 8 after Cenovus improved its offer.
In May, Strathcona put MEG in play by going public with a $23.27-per-share bid for the company. In August, Cenovus made a white knight offer, endorsed by MEG’s board of directors, which it subsequently sweetened.
Cenovus is offering $29.50 in cash or 1.24 Cenovus common shares for each MEG share, with a maximum payout of $3.8-billion in cash and 157.7 million Cenovus common shares.
Cenovus boosted its bid for MEG on Oct. 8. Since then, the company has acquired 9.8 per cent of MEG’s shares, which it plans to vote in favour of the takeover. In a press release last week, Cenovus said it may acquire more MEG shares.
Strathcona dropped its bid for MEG after the company announced it had waived an agreement that prevented Cenovus from buying shares in the company. In a press release, Strathcona said: “The MEG Board’s decision to waive Cenovus’ standstill and allow it to vote shares acquired after the record date in favour of its own transaction is without precedent in the Canadian public markets and the latest in a series of anti-competitive actions taken by the MEG board.”
“Strathcona has concluded that the MEG Board’s ability to continuously extend the Cenovus meeting date, and continuously allow Cenovus to purchase and vote additional shares, makes an improved offer for MEG impractical,” the company said.
Over the past week, several MEG shareholders wrote to the Alberta Securities Commission, asking the regulator to reverse Cenovus’s share purchases and allow the auction process to continue. To date, the ASC has stayed out of the takeover battle.
MEG owns oil sands properties in the Christina Lake region, south of Fort McMurray, Alta., and Cenovus has operations in the same area. Strathcona is also a significant oil sands producer, with properties in Alberta’s Cold Lake region. All three companies use the same steam-assisted gravity drainage approach to produce bitumen.
Cenovus estimated it can cut costs by up to $400-million annually by combining MEG’s operations with its properties.