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Cenovus made its friendly offer after MEG spurned a hostile one from fellow oilsands producer Strathcona Resources. 

The Cenovus offer is made up of about three-quarters cash, with the rest in equity, while Strathcona recently increased its bid and amended it to be all-stock. 

ISS says the latest Strathcona bid, which MEG has also rejected, carries risks that MEG shareholders may not be able to tolerate. 

Strathcona executive chairman Adam Waterous says he’s not surprised by the recommendation, since ISS tends to favour board-endorsed deals, and that he’s pleased the advisory firm only offered qualified support for Cenovus.  

ISS noted MEG’s share price could weaken if shareholders reject the Cenovus offer. It also highlighted concerns over the ability of MEG shareholders to benefit from the combined company, given the offer’s small equity component.  

“Thus, although it would not be unreasonable for shareholders comfortable with these uncertainties and risks, or frustrated with the  allocation of synergy value, to reject the offer, cautionary support for the transaction is warranted,” ISS said. 

The Cenovus offer must be approved by a two-thirds majority vote by MEG shareholders, expected to be held on Oct. 9. Strathcona has said it intends to vote its 14.2 per cent interest in MEG against the deal.

Cenovus and MEG have side-by-side oilsands properties at Christina Lake, south of Fort McMurray, Alta., while Strathcona also has operations in the region.

This report by The Canadian Press was first published Sept. 26, 2025.

Companies in this story: (TSX:CVE, TSX:SCR, TSX:MEG)