Suncor tables $3.3-bn hostile bid for Canadian Oil Sands
06 October 2015
Canadian energy major Suncor Energy Inc has submitted an unsolicited all-share offer of approximately C$4.3 billion ($3.3 billion) for oil sands investor Canadian Oil Sands Ltd (COS), taking benefit of slumping oil prices and aiming to boost production from Alberta.
Including outstanding debt of $1.8 billion at COS, the total transaction is valued over $5 billion. The deal is the second-biggest for Suncor since its acquisition of Petro-Canada in 2009 (See: Canadian oil-sands firm Suncor to acquire Petro-Canada for $13.7 billion).
Calgary, Alberta-based COS is the biggest shareholder with about 37-per cent stake in the Syncrude joint venture, which produces synthetic crude oil from Athabasca oil sands near Fort McMurray in northern Alberta.
The Syncrude project comprises open-pit oil sands mines, utilities plants, bitumen extraction plants and an upgrading complex that processes bitumen into synthetic crude. It is jointly controlled by seven owners.
Further to the news of the offer shares in COS jumped 55 per cent to close at C$9.60 yesterday in Toronto. Suncor stock ended 2 per cent down at C$34.60.
Suncor, also Calgary-based, is an integrated energy company focused on Canada's oil sands development.
Under the terms of the offer, COS shareholders will receive consideration of 0.25 shares of Suncor per COS share or about C$8.84 representing a 43-per cent premium based on the closing prices of the shares on 2 October, the last trading day before the announcement of the offer, according to a Suncor statement.
Besides, COS shareholders would get 45-per cent dividend uplift by virtue of Suncor's high annual dividend growth rate of over 20 per cent. Suncor's dividend yield is 3.3 percent, compared with 2.5 percent for COS.
Suncor's president and chief executive officer Steve Williams said in a statement, "We believe this is a financially compelling opportunity for COS shareholders."
''We're offering a significant premium to COS' current market price and also providing exposure to a meaningful dividend increase. We're confident in the value this Offer provides to COS shareholders," Williams added.
Suncor, with its significant liquidity and access to capital believes that the company is well positioned to capture value potential of COS' assets when oil prices recover.
The offer is subject to customary closing conditions including tendering of two-thirds of the outstanding COS shares, and regulatory approvals.
Responding to Suncor's offer, COS said in a statement that its board and advisors RBC Royal Bank, Osler, Hoskin & Harco will review the take-over bid and communicate a recommendation to its shareholders as soon as possible.
JP Morgan Securities LLC is acting as financial advisor and Blake to Suncor in connection with the offer while Cassels & Graydon LLP and Sullivan & Cromwell LLP are its legal advisors.
Suncor is taking advantage of the plunge in crude and stock prices to create new opportunities. Last month, it agreed to acquire an additional 10-per cent interest in Fort Hills oils sands project from Total SA for C$310 million, to increase its share in the $15-billion project to 50.8 per cent.