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Investing.com-- Canada’s Strathcona Resources (TSX:SCR) said on Thursday that it plans to launch a formal takeover bid to acquire all remaining shares of MEG Energy Corp (TSX:MEG), offering a mix of cash and stock that values the target at about C$5.95 billion ($4.3 billion).
Under the proposed terms, MEG shareholders would receive 0.62 Strathcona shares and C$4.10 in cash for each MEG share. The offer represents a 9.3% premium to MEG’s closing price on May 15 and consists of 82.4% stock and 17.6% cash.
Strathcona, which already holds nearly 10% of MEG, said the combination would create Canada’s fifth-largest oil producer.
Strathcona said it has identified C$175 million in annual synergies and expects the deal to be immediately accretive on key metrics, including funds flow and net asset value per share.
The company made an earlier merger proposal in April, which MEG’s board rejected. Strathcona said it respects that decision but believes shareholders should have the final say.
Strathcona expects to formally file the offer within two weeks and noted that Waterous Energy Fund, its largest shareholder, plans to support the bid through an additional equity investment.
Strathcona shares closed 14% higher on Thursday before the deal was announced, while MEG stock closed 1.7% lower.