Suncor Asks Regulator to Reject Canadian Oil Sands Plan

  • Alberta Securities Commission will hold hearing on Nov. 26
  • COS calls Suncor move ``smokescreen'' for weak offer

Suncor Energy Inc. is stepping up its hostile C$4.3 billion ($3.3 billion) bid for Canadian Oil Sands Ltd. by asking Alberta regulators to strike down the target’s new shareholder rights plan aimed at preventing its takeover.

The Alberta Securities Commission will hold a hearing on Nov. 26 to consider the so-called poison pill adopted by the Canadian Oil Sands board last month, Suncor said in a statement Thursday. The hearing follows Suncor’s application for an order to cease the new rights plan. Canadian Oil Sands vowed to protect its shareholders.

The Canadian Oil Sands shareholder plan calls for 120 days to consider bids. Because Suncor’s offer is open for acceptance only until Dec. 4, unless extended or withdrawn by Suncor, it would not be a permitted bid under the new plan, Canadian Oil Sands said last month.

“Suncor’s application is a smokescreen intended to obscure the weakness of its offer,” Canadian Oil Sands said in a statement. The company said it would “stand up for shareholders and vigorously oppose attempts by Suncor to remove the necessary protections of its shareholder rights plan.”

Operating Performance

Suncor, looking to bolster its status as Canada’s largest crude producer, last month renewed efforts to take over its partner and biggest shareholder in the Syncrude oil-sands joint venture after two friendly offers were rejected earlier this year. Canadian Oil Sands urged its shareholders to reject the bid and adopted the rights plan in response.

Suncor said Thursday its offer was made as a 60 day “permitted bid” in accordance with the terms of the rights plan approved by the Canadian Oil Sands’ board and shareholders in 2013.

“We are asking the ASC to strike down the new rights plan so that Canadian Oil Sands shareholders can decide for themselves - and in a timely fashion - whether to tender their shares to our full and fair offer,” Suncor said.

Suncor has highlighted its oil-sands performance as further proof that its bid should be attractive to Canadian Oil Sands investors. Suncor’s upgrading operations that process oil-sands bitumen into light crude have run at more than 90 percent of capacity this year, compared with an average 70 percent for Syncrude, the company said last month. Suncor, which would boost its stake in the partnership to 49 percent from 12 percent with the takeover, made the comments as it announced a third-quarter loss.

Other Options

Canadian Oil Sands wrote in the statement that Suncor timed its bid to expire before Syncrude’s 2016 budget would be disclosed publicly.

“It is trying to force COS shareholders to act in haste and against their best interests before the market and shareholders have access to the same information Suncor has about Syncrude,” Donald Lowry, Chairman of Canadian Oil Sands, said in the statement.

“We have been disappointed with Syncrude’s performance for some time now,” Chief Executive Officer Steve Williams said at the time. “We believe that we can drive real improvements in Syncrude’s performance with a larger ownership interest,” he said, adding that owning Suncor gives shareholders protection against an oil price collapse, while offering them the opportunity for growth.

Meanwhile, Canadian Oil Sands has had interest from a “full range” of possible partners and buyers, Chief Executive Ryan Kubik has said. The board of directors Thursday said it is considering a range of strategic alternatives including continuing as an independent company to a sale at a better price.

Suncor shares fell 1.2 percent to C$39.33 at the close in Toronto. Canadian Oil Sands declined 1.7 percent to C$10.

(An earlier version of the story corrected the statement date in the second paragraph.)

Before it's here, it's on the Bloomberg Terminal.