01:31:11 EDT Tue 10 Jun 2025
Enter Symbol
or Name
USA
CA



Strathcona Resources Ltd
Symbol SCR
Shares Issued 214,235,608
Close 2025-05-29 C$ 28.78
Market Cap C$ 6,165,700,798
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Strathcona Resources makes its move on MEG Energy

2025-05-30 10:00 ET - News Release

Also News Release (C-MEG) MEG Energy Corp

Mr. Adam Waterous of Strathcona Resources reports

STRATHCONA RESOURCES LTD. COMMENCES OFFER TO ACQUIRE MEG ENERGY CORP.

Strathcona Resources Ltd. has formally begun its offer to acquire all of the issued and outstanding common shares of MEG Energy Corp. not already owned by Strathcona or its affiliates for 0.62 of a common share of Strathcona and $4.10 in cash per common share of MEG.

The notice and advertisement of the offer has been placed for publishing in The Globe and Mail and Le Devoir, and the offer is contained in the offer to purchase and bid circular and related documents, which will be filed today with the Canadian securities regulators on SEDAR+ under MEG's profile and posted on Strathcona's website. The offer and circular will be made available to all MEG shareholders, in accordance with applicable securities laws. The offer is open for acceptance until 5 p.m. MT on Monday, Sept. 15, 2025.

Strathcona has also executed an equity commitment letter with Waterous Energy Fund (WEF), the holder of 79.6 per cent of the outstanding Strathcona shares, through certain limited partnerships comprising Waterous Energy Fund III (WEF III), pursuant to which WEF III has committed to purchase an additional 21.4 million Strathcona shares through subscription receipts, conditional upon completion of the offer.

Pursuant to the terms of the equity commitment letter, the investment will be completed at a subscription price of $30.92 per subscription receipt, being equivalent to the price of the Strathcona shares on May 15, 2025, prior to Strathcona announcing its intention to make the offer, equating to an incremental investment by WEF in Strathcona of approximately $662-million. To Strathcona's knowledge, this represents the largest investment at one time by a single shareholder, public or private, in the Canadian upstream oil and gas sector since 2014.

Adam Waterous, executive chairman of Strathcona and chief executive officer of WEF, commented: "WEF's major further investment in Strathcona reflects our view that, more than eight years into building Strathcona, our best years are in front of us. As part of the offer, we are asking MEG shareholders to join us as fellow shareholders in Strathcona and trust the Strathcona team as stewards of their capital. We, therefore, believe it is important that we eat our own cooking, ensuring no one will be more focused on increasing Strathcona's value beyond current levels than WEF. We firmly believe Strathcona represents compelling value at this price with a large margin of safety, and that we and the partners in our fund will do very well over the long run."

Offer details

The offer is subject to the satisfaction or, where permitted, waiver of certain conditions, including, without limitation: (i) there having been validly deposited under the offer and not withdrawn more than 50 per cent of the outstanding MEG shares (and associated rights under MEG's shareholder rights plan), excluding any MEG shares beneficially owned, or over which control or direction is exercised, by Strathcona or by any person acting jointly or in concert with Strathcona, which condition cannot be waived by Strathcona; (ii) there having been validly deposited under the offer and not withdrawn MEG shares (and associated rights under MEG's shareholder rights plan) which represent, together with the MEG shares held by Strathcona, at least 66-2/3rds per cent of the outstanding MEG shares (on a fully diluted basis); (iii) no material adverse change having occurred in respect of the business, affairs, assets, operations or prospects of MEG; (iv) all required governmental, regulatory and stock exchange approvals, or expiry, waiver or termination of any waiting or suspension period imposed, with respect to the offer, including, without limitation, pursuant to the Competition Act (Canada) and the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the approval of the Toronto Stock Exchange with respect to the issuance and listing of the Strathcona shares issuable pursuant to the offer, having been obtained; (v) the registration statement (as defined herein) having become effective under the U.S. Securities Act (as defined herein), and not becoming subject to a stop order or a proceeding seeking a stop order; (vi) MEG not having taken certain actions that could reasonably be expected to reduce the anticipated economic value to Strathcona of the offer or impair the ability of Strathcona to proceed with the offer; (vii) Strathcona having obtained the requisite approval of the Strathcona shareholders with respect to the issuance of the Strathcona shares under the offer pursuant to the rules of the TSX; and (viii) other customary conditions.

The offer is not subject to any due diligence or financing condition, with the cash consideration payable under the offer to be financed pursuant to a bridge financing commitment from a syndicate of lenders, subject to the terms and conditions of such financing.

If the conditions of the offer are satisfied or, where permitted, waived at the expiry time of the offer and Strathcona takes up and pays for the MEG shares validly deposited under the offer, Strathcona intends to acquire any MEG shares not deposited under the offer through a compulsory acquisition pursuant to the Business Corporations Act (Alberta), if available, or to propose an amalgamation, statutory arrangement or other transaction for the purpose of MEG becoming, directly or indirectly, a wholly owned subsidiary or affiliate of Strathcona, in each case for consideration per MEG share at least equal in value to and in the same form as the consideration paid by Strathcona per MEG share under the offer. The exact timing and details of any such transaction will depend upon a number of factors, including, without limitation, the number of MEG shares acquired pursuant to the offer.

Strathcona encourages MEG shareholders to read the full details of the offer set forth in the offer and circular, which contain the full terms and conditions of the offer and other important information as well as detailed instructions on how MEG shareholders can deposit their MEG shares to the offer.

Shareholders who have questions or require assistance in depositing MEG shares to the offer should contact the information agent, Laurel Hill Advisory Group, by e-mail at assistance@laurelhill.com or by phone at 1-877-452-7184 (toll-free).

Copies of the offer and circular, once filed, will be available, without charge, on request from Strathcona by e-mail at info@strathconaresources.com or by phone at 403-930-3000, or by contacting Laurel Hill Advisory Group per the instructions set forth herein.

In connection with the offer, Strathcona will file relevant materials with the United States Securities and Exchange Commission (SEC), including a registration statement on Form F-10 under the United States Securities Act of 1933, as amended, which will include the offer and circular and other documents related to the offer. This news release is not a substitute for the registration statement, the offer and circular, or any other relevant documents filed with the applicable Canadian securities regulatory authorities or the SEC. MEG shareholders and other interested parties are urged to read the registration statement, the offer and circular, all documents incorporated by reference therein, all other applicable documents, and any amendments or supplements to any such documents when they become available, because they will contain important information about Strathcona, MEG and the offer. When they become available, the registration statement, offer and circular, and other materials filed by Strathcona with the SEC will be available electronically, without charge, at the SEC's website. When available, the registration statement, offer and circular, documents incorporated by reference therein, and other relevant documents may also be obtained on request, without charge, from Strathcona or by contacting Laurel Hill Advisory Group per the instructions set forth herein.

WEF III equity investment details

Pursuant to an equity commitment letter dated May 29, 2025, WEF III has committed to subscribe for and purchase 21.4 million subscription receipts of Strathcona at a price of $30.92 per Strathcona subscription receipt for aggregate proceeds to Strathcona of approximately $662-million.

Each Strathcona subscription receipt will entitle WEF III to receive, automatically upon, among other specified circumstances, the take-up of MEG shares deposited under the initial deposit period for the offer, one Strathcona share. The Strathcona shares issuable upon conversion of the Strathcona subscription receipts represent approximately 9.99 per cent of the Strathcona shares issued and outstanding as of May 29, 2025.

The subscription price of the Strathcona subscription receipts and other terms and conditions of the WEF III equity investment were determined in accordance with the rules of the TSX with reference to the five-day volume-weighted average price of the Strathcona shares on the TSX immediately prior to and including May 29, 2025, and through negotiations between WEF III and a special committee comprising independent directors of Strathcona that was established in connection with the WEF III equity investment. The subscription price of $30.92 per Strathcona subscription receipt is equal to the closing price of the Strathcona shares on the TSX on May 15, 2025, prior to Strathcona announcing its intention to make the offer, and reflects a 7-per-cent premium to the five-day volume-weighted average price of the Strathcona shares on the TSX immediately prior to and including May 29, 2025.

The proceeds of the WEF III equity investment will be held in escrow by a subscription receipt agent and released to, or at the direction of, Strathcona concurrently upon Strathcona taking up MEG shares at the expiration of the initial deposit period for the offer, and will be used by Strathcona to reduce a portion of the amount financed under the bridge financing commitment and pay a portion of the cash consideration payable under the offer. In the event that Strathcona withdraws or terminates the offer, and has not substantially concurrently entered into a definitive agreement to acquire MEG, the proceeds of the WEF III equity investment will be returned to WEF III.

The completion of the WEF III equity investment is subject to the satisfaction or waiver of certain customary conditions and is expected to be completed no later than July 13, 2025, being the date that is 45 days from the date of the equity commitment letter. The offer is not conditional on the closing of the WEF III equity investment.

Strathcona shareholder approval

Strathcona expects to issue up to an aggregate of approximately 145 million Strathcona shares pursuant to the offer, consisting of 143 million Strathcona shares issuable for MEG shares deposited pursuant to the offer and two million Strathcona shares issuable for the MEG shares issued upon settlement of certain security-based compensation awards of MEG, representing, in the aggregate, approximately 68 per cent of the 214,235,608 Strathcona shares issued and outstanding as at the date hereof. Strathcona expects to issue an additional 21.4 million Strathcona shares upon conversion of the Strathcona subscription receipts issued pursuant to the WEF III equity investment.

Under Section 611 of the TSX company manual, the issuance of approximately 169.3 million Strathcona shares, comprising 145 million Strathcona shares issuable in respect of the offer, 21.4 million Strathcona shares issuable in respect of the WEF III equity investment, and 2.9 million Strathcona shares to account for clerical and administrative matters, as permitted under the rules of the TSX, requires the approval of Strathcona shareholders, as the maximum number of Strathcona shares issuable pursuant to the offer exceeds 25 per cent of the total number of outstanding Strathcona shares.

Pursuant to Section 604(d) of the TSX company manual, WEF, as the holder of more than 50 per cent of the votes attached to the outstanding Strathcona shares, has delivered to the TSX its written consent for the issuance of up to 169.3 million Strathcona shares in respect of the Strathcona share issuance in satisfaction of such shareholder approval requirement, in lieu of a duly called meeting of securityholders. The TSX will generally not require further securityholder approval for the issuance of up to, approximately, an additional 36,975,000 Strathcona shares, such number being 25 per cent of the number of Strathcona shares approved by securityholders in connection with the offer. The offer is being effected at arm's length, and the issuance of Strathcona shares is not expected to materially affect control of Strathcona.

Assuming acquisition of all MEG shares under the offer and any second-stage transaction, and upon completion of the WEF III equity investment, WEF is expected to own approximately 51 per cent of the then-issued-and-outstanding Strathcona shares. The WEF III equity investment and the offer are expected to close not earlier than five business days after dissemination of this press release.

Advisers

Scotiabank and TD Securities are acting as exclusive financial advisers to Strathcona in connection with the offer. Blake, Cassels & Graydon LLP and Skadden, Arps, Slate, Meagher & Flom LLP are acting as legal counsel to Strathcona in connection with the offer. The special committee has engaged Torys LLP, and WEF has engaged Bennett Jones LLP, to act as their respective legal counsel in connection with the WEF III equity investment.

Strathcona has also engaged Laurel Hill Advisory Group to act as strategic communications adviser and information agent in connection with the offer. MEG shareholders may contact Laurel Hill Advisory Group by e-mail at assistance@laurelhill.com, or by phone at 1-877-452-7184 (toll-free).

About Strathcona Resources Ltd.

Strathcona is one of North America's fastest-growing oil producers, with operations focused on thermal oil and enhanced oil recovery. Strathcona is built on an innovative approach to growth achieved through the consolidation and development of long-life oil and gas assets.

We seek Safe Harbor.

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