Cenovus makes an $8B bid for MEG, but it's not over yet
Cenovus (CVE) is stepping up to the plate with a $7.9B bid for MEG Energy (MEG), funded by $5.2B of cash and the remaining 25% in stock. Many consider CVE the most logical home for MEG’s assets given proximity…
… and technology overlap, with the combined company being the clear leader in SAGD production. All in, management expects to achieve $400M of run-rate synergies…
… which would make this deal accretive despite Cenovus offering a premium to its current multiple for MEG’s assets. Should it get over the finish line, pro-forma debt would sit well above target…
… causing management to more aggressively target leverage reduction with free cash flow and potential asset sales.
… nobody should be surprised if we do find a way to reduce debt more quickly and get back to 100% shareholder returns a lot sooner than just organically deleveraging.
But it’s not a sure thing yet, with MEG trading above the $27.25/sh offer and closer to Strathcona’s stock-heavy bid that at current prices, represents over $28/sh.
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