MEG Energy Corp. (MEG.TO) rejected a $3 billion hostile takeover by Husky Energy Inc. and plans to start a strategic review with an eye to finding another buyer.

The Calgary-based oil-sands producer said on Wednesday that its board unanimously rejected the unsolicited bid Husky made last month, arguing it significantly undervalues the company and that it expected superior offers to emerge.

“Over the last few years, there has been a substantial transformation of our business, culminating in the appointment of a top-rated CEO and the strengthening of our management team,” MEG Chairman Jeffrey McCaig said in a statement.

Husky’s offer is still in the best interests of both companies’ investors, representing a 44 per cent premium for MEG shareholders, participation in Husky’s dividend and a stronger balance sheet, Husky spokesman Mel Duvall said Wednesday in an emailed statement. The company on Thursday said its offer will be open for acceptance until Jan. 16.

The pursuit of MEG is happening against a backdrop of plunging Canadian crude prices. Western Canada Select has traded at a record discount to West Texas Intermediate in October as rising oil-sands production bumps up against pipeline bottlenecks and maintenance at U.S. refineries.

Husky proposed last month to pay MEG shareholders either $11 in cash or 0.485 Husky shares, subject to pro-ration. Husky Chief Executive Officer Rob Peabody had taken his cash-and-stock proposal directly to shareholders after MEG’s board spurned an earlier offer. MEG said after reviewing the offer with its financial adviser, Bank of Montreal, it was recommending investors not tender their shares.

MEG’s shares rose 0.7 per cent to $10.87 at 12:17 p.m. in Toronto, slightly lower than Husky’s cash offer price.

MEG said it planned to explore strategic options for the company that could include a sale of all or part of the company.

“MEG is now at an inflection point with a low-risk business plan and a clear line of sight to significant free cash flow generation commencing in 2019,” McCaig said.

MEG could draw interest from companies including Suncor Energy Inc., Imperial Oil Ltd. and Canadian Natural Resources Ltd., according to Phil Skolnick, an analyst with Eight Capital. He also speculated that Husky may want to increase its offer price to as much as $15 a share before the deal hurts it financially. MEG’s Christina Lake project, which produces roughly 90,000 barrels a day, is considered one of Canada’s top-tier oil-sands operations.