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Cenovus postpones meeting to secure more investor support

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Strathcona opposes merger, owns 14% of MEG shares

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MEG board supports revised bid despite contentious process

By Amanda Stephenson and Pooja Menon

Oct 21 (Reuters) - A months-long fight for control of

Canada's last pure-play oil sands company took a fresh twist on

Tuesday, as MEG Energy Corp ( MEGEF ) postponed a scheduled

meeting at which shareholders were set to vote on its proposed

takeover by Cenovus Energy ( CVE ).

MEG said the meeting, which was set to take place on

Wednesday, will now take place on October 30 after Cenovus

exercised its contractual right to delay it.

The postponement will allow Cenovus more time to secure investor

support for its offer, which it already sweetened once after

some MEG shareholders criticized the initial bid for being too

low.

Cenovus said on Tuesday about 63% of MEG common shareholders are

in favor of the transaction, or more than 75% when excluding

rival Strathcona Resources ( STHRF ), which is presumed to vote

against it. Cenovus must have two-thirds support for its offer,

or just over 66%, in order to be successful.

Strathcona, which is smaller than Cenovus and backed by

private equity firm Waterous Energy Fund, owns or controls about

14% of MEG shares.

Strathcona said on October 10 it was abandoning its own hostile

bid for MEG, after Cenovus raised its bid to C$8.6 billion

($6.17 billion), including debt.

MEG's board supports Cenovus's revised bid, but the merger

process has been more contentious than is typical for the

Canadian oilpatch.

Adam Waterous, executive chair of Strathcona, accused

Cenovus of resorting to "fear and misrepresentation to keep an

upstart at bay", and of "preying" on MEG's board, which he has

publicly called weak.

Waterous also criticized MEG's decision to waive a

standstill agreement in order to allow Cenovus to purchase more

shares in the company in the lead-up to the vote, raising its

stake to nearly 9.8% in order to vote in favour of its own

offer.

Three MEG shareholders told Reuters last week they have

filed complaints with Alberta's securities regulator over the

lifting of the standstill agreement and what they view as the

board's attempt to tilt the sales process in Cenovus's favour.

Cenovus's deal is the best one on the table for MEG and

will likely be approved, even if the company must work hard over

the next week to canvass shareholders, said Anup Srivastava, a

corporate governance expert at the University of Calgary's

Haskayne School of Business.

"If 63% have already voted in favor, that means the

majority think it's worth it," he said. "It's just that not

everybody votes - there are many passive shareholders out

there."

MEG's Christina Lake oil sands project has become an

attractive asset for its long reserve life, low operating costs

and potential for production growth.

It is one of the few large-scale expansion opportunities in

Canada's oil sands, which are dominated by a small group of

domestic players following the exit of most foreign companies

over the past decade.

($1 = 1.4024 Canadian dollars)