Suncor Energy to buy Canadian Oil Sands in a $2.92 bn friendly deal

Canadian oil company Suncor Energy Inc today struck a deal to buy Canadian Oil Sands Ltd. for C$4.24 billion ($2.92 billion) in an all stock offer.

The friendly deal was arrived after Suncor raised the stock component of its offer from about C$3.78 billion to C$4.24 billion.

The new all-stock offer consists of 0.28 of a Suncor share for each Canadian Oil Sands share, up from the earlier 0.25 a share or 12 per cent more than before.

The new bid values Canadian Oil Sands at about C$6.6 billion, including debt of about C$2.4 billion.

''Since Suncor made its initial offer, our board has remained steadfast in our commitment to maximize value for all shareholders. This agreement fulfills that commitment, providing our shareholders with a higher exchange ratio for their shares despite a 37 per cent decline in spot oil prices,'' said Don Lowry, chairman of Canadian Oil Sands.

Canadian billionaire Seymour Schulich, who holds a 5.2-per cent stake in Canadian Oil Sands and had earlier opposed the deal, said that he would tender his shares to the revised offer.

"We are pleased to have the support of the COS Board of Directors and shareholders, including Seymour Schulich, and have been advised of their intent to tender their shares" said Steve Williams, Suncor's president and CEO.

"We believe this transaction delivers excellent value to COS shareholders while maintaining Suncor's commitment to capital discipline, providing both companies' shareholders with near and long-term value. Together, we're bringing this full, fair and final offer to COS shareholders and we encourage everyone to tender their shares," he added.

Canadian Oil Sands, the largest owner of the giant Syncrude oil-sands mining consortium in Alberta, had earlier said that Suncor's all-stock offer too low and put Suncor under pressure to revise its bid. (See: Suncor tables $3.3-bn hostile bid for Canadian Oil Sands)

Calgary, Alberta-based Canadian Oil Sands 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.

Suncor, also Calgary-based, is an integrated energy company focused on Canada's oil sands development.

The deal is subject to at least 51 per cent of COS shares being tendered to the offer.

The Canadian Oil Sands board has agreed to pay a $130 million break fee to Suncor if certain conditions aren't met.