MEG eyes options after rejecting Husky bid

CALGARY • MEG Energy Corp. plans to start a strategic review with an eye to finding another buyer after rejecting a $3-billion hostile takeover by Husky Energy Inc.

MEG’S board unanimously rejected the unsolicited bid Husky made last month, arguing it significantly undervalues the company and that it expects superior offers to emerge.

“Over the last few years, there has been a substantial transformation of our business, culminating in the appointment of a top-rated CEO and the strengthening of our management team,” MEG chair Jeffrey Mccaig said in a statement.

Husky’s offer is still in the best interests of both companies’ investors, representing a 44-per-cent premium for MEG shareholders, participation in Husky’s dividend and a stronger balance sheet, Husky spokesman Mel Duvall said Wednesday in an emailed statement. The company on Thursday said its offer will be open for acceptance until Jan. 16.

The pursuit of MEG is happening against a backdrop of plunging Canadian crude prices. Western Canada Select has traded at a record discount to West Texas Intermediate in October as rising oilsands production bumps up against pipeline bottlenecks and maintenance at U.S. refineries.

Husky proposed last month to pay MEG shareholders either $11 in cash or 0.485 Husky shares, subject to pro-ration. Husky CEO Rob Peabody had taken his cash-and-stock proposal directly to shareholders after MEG’S board spurned an earlier offer. MEG said it was recommending investors not tender their shares.

MEG said it planned to explore strategic options for the company that could include a sale of all or part of the company.

MEG could draw interest from firms including Suncor Energy, Imperial Oil and Canadian Natural Resources, according to Phil Skolnick with Eight Capital. He also speculated Husky may want to increase its offer to as much as $15 a share. MEG’S Christina Lake project, which produces roughly 90,000 barrels a day, is considered one of Canada’s toptier oilsands operations.