Cenovus Energy to acquire MEG Energy in C$7.9 billion deal.

Cenovus Energy has agreed to acquire MEG Energy in a C$7.9 billion deal. MEG Energy is a Canada-based energy company focused on in-situ thermal oil production in the southern Athabasca oil region of Alberta. The acquisition will strengthen Cenovus's position in the oil sands sector and provide access to MEG's production base, including its Christina Lake Project. The deal is expected to close in the second half of 2023, subject to regulatory approvals.

Cenovus Energy Inc. (TSX: CVE) (NYSE: CVE) has announced a definitive agreement to acquire MEG Energy Corp. (TSX: MEG) in a cash and stock transaction valued at C$7.9 billion, inclusive of assumed debt. The deal is expected to close in the fourth quarter of 2025, subject to regulatory approvals.

Under the terms of the agreement, Cenovus will acquire all of the issued and outstanding common shares of MEG for C$27.25 per share, with 75% in cash and 25% in Cenovus common shares. Each MEG shareholder will have the option to receive either cash or Cenovus common shares, with a maximum of C$5.2 billion in cash and 84.3 million Cenovus common shares. The transaction is expected to be immediately accretive to adjusted funds flow per share and free funds flow per share.

The acquisition aims to reinforce Cenovus's position as the leading SAGD (steam-assisted gravity drainage) oil sands producer. It brings together two leading SAGD oil sands producers with combined oil sands production of over 720,000 barrels per day (bbls/d), the lowest steam-to-oil ratio, and the largest land base in the best quality resource area in the basin. The acquisition will also consolidate adjacent, fully contiguous, and highly complementary assets at Christina Lake, enabling integrated development of the region and unlocking significantly accelerated access to previously stranded resource.

Cenovus expects to realize approximately C$150 million of near-term annual synergies, growing to over C$400 million per year in 2028 and beyond. This includes corporate and commercial synergies as well as development and operating synergies, leveraging both companies' technical expertise and the ability to integrate future development across the Christina Lake region.

The transaction has been structured to preserve Cenovus's strong balance sheet and investment grade credit ratings, with expected pro forma net debt of 1 times adjusted funds flow (AFF) at strip pricing. Cenovus will retain a robust financial framework and continue to balance deleveraging with meaningful shareholder returns.

The acquisition is expected to be immediately accretive to adjusted funds flow per share and free funds flow per share. The transaction has been structured to preserve Cenovus's strong balance sheet and investment grade credit ratings, with expected pro forma net debt of 1 times adjusted funds flow (AFF) at strip pricing. Cenovus will retain a robust financial framework and continue to balance deleveraging with meaningful shareholder returns.

Cenovus has obtained fully committed financing for the transaction comprised of a C$2.7 billion term loan facility and a C$2.5 billion bridge facility, which will be used to fund the cash component of the transaction. Upon completion of the transaction, Cenovus will maintain its strong financial position with liquidity of over C$8 billion in undrawn committed credit facilities and cash on hand. The company remains committed to a strong balance sheet and investment grade credit ratings.

The acquisition is expected to close in the fourth quarter of 2025, subject to the satisfaction of customary closing conditions, including regulatory approvals and approval of the transaction by MEG shareholders. The transaction is not subject to any financing contingency.

References:
[1] https://finance.yahoo.com/news/cenovus-announces-agreement-acquire-meg-100000219.html