Cenovus Power Inc. agreed to purchase MEG Power Corp. for C$6.93 billion ($5 billion), beating a bid from Strathcona Assets Ltd. to spice up its place amongst Canada’s prime oil producers.
The deal values MEG at C$27.25 and requires Cenovus to pay three-quarters in money and 1 / 4 in inventory, in line with a press release Friday. Cenovus expects the acquisition to shut within the fourth quarter, topic to regulatory and shareholder approvals. The full worth of the deal is C$7.9 billion together with debt.
The settlement caps a three-month battle for management of MEG triggered when oil tycoon Adam Waterous’ Strathcona Assets made an unsolicited cash-and-stock bid. MEG’s board had spurned Strathcona’s approaches earlier than it took the proposal public. As soon as disclosed, some MEG buyers panned the roughly C$6 billion proposal as too low. The board began a strategic evaluation to hunt different gives.
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Royal Financial institution of Canada analyst Greg Pardy mentioned in Could that Cenovus was “essentially the most logical match” to take over MEG as a result of it additionally operates in Christina Lake, providing larger potential working synergies than different doable patrons.
The Cenovus takeover unites two Calgary-based corporations with important operations within the oil-sands area of northeastern Alberta. MEG’s Christina Lake challenge contains 200 sq. kilometers (77 sq. miles) of leases within the oil-rich space, and the corporate has regulatory approvals to provide round 210,000 barrels a day.
MEG, which pumps about 100,000 barrels of crude a day, is likely one of the final firms within the business sufficiently small to be taken over however massive sufficient to vault the acquirer up within the ranks of the nation’s main producers.
Cenovus is the third-largest Canadian crude producer by stock-market worth, producing the equal of about 800,000 barrels of oil a day final 12 months – largely bitumen, together with pure fuel liquids and a few typical oil and fuel.
“This transaction represents a novel alternative to amass roughly 110,000 barrels per day of manufacturing inside a few of the highest high quality, longest-life oil sands useful resource within the basin, which sits instantly adjoining to our core Christina Lake asset,” Cenovus CEO Jon McKenzie.
Cenovus is financing the cope with a C$2.7 billion time period mortgage facility and a C$2.5 billion bridge facility, which will likely be used to fund the money a part of the transaction. The time period mortgage and bridge services had been supplied by Canadian Imperial Financial institution of Commerce and JPMorgan Chase & Co.
Goldman Sachs Group Inc. and CIBC had been the monetary advisers to Cenovus, whereas McCarthy Tétrault LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP had been its authorized advisers.
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