ISS Gives Lukewarm Endorsement to Cenovus Offer for MEG Energy

A prominent shareholder adviser recommended investors vote in favor of Cenovus Energy Inc.’s C$7.3 billion ($5.2 billion) takeover of MEG Energy Corp., boosting the oil producer’s bid to consolidate Canada’s oil sands sector.

The transaction offers MEG holders “an opportunity to participate in the upside potential of the combined company, albeit only partially, and there appears to be downside risk of non-approval,” Institutional Shareholder Services Inc. said in a report to clients. “Cautionary support for the transaction is warranted.”

Cenovus’s offer is to be paid three-quarters in cash and a quarter in stock, a bid that’s worth about ...