TORONTO (Reuters) - A Cenovus Energy Inc (CVE.TO) shareholder has asked a Canadian regulator to halt the company’s recent C$17 billion ($12.6 billion) purchase of some ConocoPhillips (COP.N) assets, saying the new stock issued to help fund the deal has diluted the value of Cenovus shares.
Toronto-based Coerente Capital Management has filed a letter with the Ontario Securities Commission, Len Racioppo, Coerente’s managing director, said in an email to Reuters on Tuesday.
“It is pretty outrageous that they would do a deal that would dilute shareholders by 47 percent and not bring it to a vote,” Racioppo said, confirming a comment he made earlier to the Financial Post. “If you’re going to transform a company without asking shareholders — I don’t care if it’s legal — it’s not right,” he added.
Racioppo told the Financial Post he had asked the regulator to halt the deal pending a shareholder vote. Coerente owns or controls 524,000 Cenovus shares for its clients, according to the Financial Post.
Cenovus last month agreed to buy most of ConocoPhillips’ Canadian oil and gas assets in a deal that effectively doubled the size of the Canadian oil company, but dented its pristine balance sheet and pushed it into the largely unknown territory of natural gas.
The acquisition was funded in part through the selling of new shares, but the deal is structured in a way that it does not require shareholder approval. Cenovus reports earnings and holds its shareholder meeting on Wednesday..
Asked about the company’s response to the letter, Cenovus spokesman Brett Harris said the transaction would create “significant” shareholder value while maintaining financial resiliency.
“The board of directors then structured the overall transaction as it believed was in the best interests of the company, and did so within its authority,” he said.
Cenovus shares were flat on Tuesday, having lost about a fifth of their value since the deal was announced. The commission declined to comment.
Reporting by Denny Thomas in Toronto and Ethan Lou in Calgary, Alberta; Editing by David Gregorio