By Open Grid Scheduler / Grid Engine - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=31253936
CALGARY — Proxy advisory firm Institutional Shareholder Services (ISS) is recommending cautionary support for MEG Energy’s proposed takeover by Cenovus Energy.
ISS said MEG shareholders face a difficult decision because the Cenovus offer is not especially compelling but it remains uncertain whether a superior bid will emerge. Cenovus has proposed a deal consisting of about three-quarters cash and the rest equity, while rival Strathcona Resources has tabled an all-stock offer that MEG has rejected.
The advisory firm warned that MEG’s share price could weaken if the Cenovus offer is voted down, but also noted concerns that the small equity component may limit shareholder benefits from the combined company.
MEG previously spurned a hostile takeover attempt from Strathcona, which has since increased its bid. ISS said risks linked to Strathcona’s proposal may be more than MEG shareholders are prepared to accept.
The Cenovus offer requires approval from two-thirds of MEG shareholders at a vote scheduled for Oct. 9. Strathcona, which owns a 14.2 per cent stake in MEG, has said it will oppose the deal.
Cenovus and MEG operate neighbouring oilsands properties at Christina Lake, south of Fort McMurray, Alta., while Strathcona also has operations in the region.
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