- Cenovus Energy (TSX:CVE) is acquiring MEG Energy (TSX:MEG)for C$7.9 billion, offering C$27.25 per share in a mix of 75 per cent cash and 25 per cent stock.
- The deal creates a leading SAGD oil sands producer, with over 720,000 barrels/day and significant synergies expected to exceed C$400 million annually by 2028.
- Cenovus maintains a strong financial position, securing full financing and updating its shareholder returns framework to balance debt reduction and investor payouts
- Cenovus Energy stock (TSX:CVE) opened trading at C$22.10 and MEG Energy stock (TSX:MEG) opened trading at C$27.18
Cenovus Energy (TSX:CVE) announced that it has signed an agreement to acquire MEG Energy Corp. (TSX:MEG) in a cash-and-stock transaction valued at C$7.9 billion (US$5.68 billion), inclusive of assumed debt.
This content has been prepared as part of a partnership with Cenovus Energy and MEG Energy and is intended for informational purposes only.
Under the terms of the deal, MEG shareholders will receive C$27.25 per share, with 75 per cent of the consideration paid in cash and 25 per cent in Cenovus common shares. Shareholders may elect to receive either the full cash amount or 1.325 Cenovus shares per MEG share, subject to pro-ration. On a fully pro-rated basis, this equates to approximately C$20.44 in cash and 0.33125 Cenovus shares per MEG share.
Strategic impact
The acquisition will solidify Cenovus’s position as the leading producer in the steam-assisted gravity drainage (SAGD) oil sands sector. The combined entity will boast over 720,000 barrels per day of oil sands production, the lowest steam-to-oil ratio in the industry, and the largest contiguous land base in Alberta’s Christina Lake region.
“This transaction represents a unique opportunity to acquire approximately 110,000 barrels per day of production within some of the highest quality, longest-life oil sands resource in the basin, which sits directly adjacent to our core Christina Lake asset,” Jon McKenzie, Cenovus’ President and CEO said in a news release. “The magnitude of synergies that we have identified makes this a compelling value creation opportunity for Cenovus shareholders. The team at MEG has done a fantastic job developing these assets, and we look forward to leveraging our combined expertise and scale to drive additional value for many years to come.”
Financial and operational synergies
Cenovus expects to realize approximately C$150 million in near-term annual synergies, growing to over C$400 million annually by 2028. These include corporate, commercial, and operational efficiencies, particularly through integrated development of the Christina Lake assets.
The deal is expected to be immediately accretive to Cenovus’s adjusted funds flow and free funds flow per share. Pro forma net debt is projected to be approximately C$10.8 billion, representing less than one times adjusted funds flow at strip pricing.
Financing and shareholder returns
Cenovus has secured fully committed financing through a C$2.7 billion term loan and a C$2.5 billion bridge facility, provided by CIBC (TSX:CM) and JPMorgan Chase (NYSE:JPM). The company plans to replace the bridge facility with a senior debt offering.
Following the transaction, Cenovus will revise its shareholder returns framework. While net debt remains above C$6 billion, 50 per cent of excess free funds flow will be returned to shareholders. This increases to 75 per cent when net debt is between C$6 billion and C$4 billion, and 100 per cent once the long-term net debt target of C$4 billion is achieved.
MEG’s Board of Directors has unanimously approved the transaction and recommends shareholders vote in favor at a special meeting expected in early October. The deal represents a 33 per cent premium to MEG’s unaffected 20-day volume-weighted average share price as of May 15, 2025.
MEG had previously rejected a hostile takeover bid from Strathcona Resources, citing governance risks and inferior asset quality. The board concluded that the Cenovus offer provides superior short- and long-term value.
The acquisition is expected to close by Q4 2025, pending regulatory approvals and shareholder consent. It is not subject to any financing contingency
Cenovus Energy Inc. has oil and natural gas production operations in Canada and the Asia Pacific region and upgrading, refining and marketing operations in Canada and the United States.
MEG Energy Corp. is focused on sustainable in situ thermal oil production in the southern Athabasca oil region of Alberta.
Cenovus Energy stock (TSX:CVE) opened trading more than 3 per cent higher at C$22.10 and has added 0.28 per cent since the year began, while MEG Energy stock (TSX:MEG) opened trading down 0.44 per cent at C$27.18 and has risen 16.48 per cent since the year began.
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