Cenovus Energy has announced a definitive agreement to acquire MEG Energy in a deal valued at $7.9 billion, including the assumption of MEG’s debt. The acquisition will be conducted through a mix of cash and Cenovus common shares, with MEG shareholders receiving $27.25 per share—75% in cash and 25% in shares. Shareholders can elect to receive either the full cash amount or Cenovus shares, but the final ratio will be subject to pro-ration limits. On a fully prorated basis, each share represents roughly $20.44 in cash and 0.33125 of a Cenovus share.
To support the transaction, Cenovus has secured fully committed financing: a $2.7 billion term loan facility and a $2.5 billion bridge facility. The company plans to replace the bridge facility with a senior debt offering. These measures will help preserve Cenovus’s strong balance sheet, maintaining investment-grade credit ratings. After the deal, Cenovus will have liquidity of over $8 billion in undrawn credit facilities and cash on hand. Pro forma net debt is estimated at about $10.8 billion, which keeps net debt below one times adjusted funds flow at current market pricing.
The company is updating its shareholder returns framework. While net debt exceeds $6 billion, Cenovus will return approximately 50% of excess free funds flow to shareholders and allocate the remainder to debt reduction. This return increases to 75% when net debt is between $6 and $4 billion and rises to 100% once net debt is below $4 billion.
The boards of both Cenovus and MEG have unanimously approved the transaction, which is expected to close in the fourth quarter of 2025, pending regulatory and shareholder approval. No financing contingency is attached to the deal.
Advisors: Goldman Sachs Canada and CIBC Capital Markets are acting as financial advisors to Cenovus. McCarthy Tétrault and Paul, Weiss, Rifkind, Wharton & Garrison are acting as legal advisor to Cenovus.
KEY QUOTE:
“This transaction represents a unique opportunity to acquire approximately 110,000 barrels per day of production within some of the highest quality, longest-life oil sands resource in the basin, which sits directly adjacent to our core Christina Lake asset. The magnitude of synergies that we have identified makes this a compelling value creation opportunity for Cenovus shareholders. The team at MEG has done a fantastic job developing these assets, and we look forward to leveraging our combined expertise and scale to drive additional value for many years to come.”
Jon McKenzie, Cenovus President & Chief Executive Officer