(Reuters) -Canadian oil producer MEG Energy ( MEGEF ) said on Friday it has agreed to be acquired by larger peer Cenovus Energy ( CVE ) in a cash-and-stock deal worth C$6.93 billion, to create one of the largest oil sands companies in Canada.

In May, Canadian oil and gas producer Strathcona said it planned to launch a C$5.93 billion hostile takeover bid for MEG.

MEG Energy ( MEGEF ) urged its shareholders in June to reject the hostile takeover offer, calling the bid inadequate and not in their best interest. The board also launched a strategic review to explore alternatives that could lead to a better offer.

Cenovus' name was floated by analysts and in media reports as a possible white-knight buyer for rival oil sands producer MEG.

Under the transaction, each shareholder of MEG Energy ( MEGEF ) will receive C$27.25 in cash, or 1.325 common shares of Cenovus Energy ( CVE ).

(Reporting by Vallari Srivastava, Pranav Mathur and Pooja Menon in Bengaluru in Bengaluru; Editing by Pooja Desai and Shinjini Ganguli)