Suncor Urges Canadian Oil Sands' Holders to Tender Shares

  • Company has considered range of alternatives, including sale
  • Suncor Energy's offer of C$4.3 billion expires on Jan. 8

Suncor Urges Canadian Oil Sands' Holders to Tender Shares

Suncor Energy Inc. urged Canadian Oil Sands Ltd. shareholders to tender their shares immediately in its C$4.3 billion ($3.1 billion) hostile bid after the Calgary oil company failed to find a more compelling bidder for the company.

“We are urging COS shareholders to act now to protect the value of their investment by tendering their shares to our offer,” Suncor Chief Executive Officer Steve Williams said Monday in a statement. “In the ten months since we first approached COS about a friendly business combination, we believe COS’ prospects as an independent company in a ‘lower for even longer’ oil price environment have worsened considerably.”

Suncor’s offer is worth C$8.93 per share, an 8 percent premium to Canadian Oil Sands’ trading price on Dec. 31, according to data compiled by Bloomberg. Suncor said its offer represents a 44 percent premium to Canadian Oil Sands’ pre-offer trading price, and would result in a 45 percent cash dividend increase for shareholders.

Canadian Oil Sands said earlier Monday its shareholders’ interests are best served by remaining independent when Suncor’s hostile bid expires on Jan. 8. 

The board of Canadian Oil Sands said in a letter to shareholders Monday it had considered a full range of alternatives, including a full or partial sale to other parties as well as a royalty financing.

‘Substantially Undervalued’ 

After the review, the company said it determined those alternatives deliver “substantially lower risk-adjusted value” than the existing assets.

“Independence is, by far, the better decision,” Don Lowry, Canadian Oil Sands chairman, said in the letter.

Canadian Oil Sands said the Suncor bid “substantially undervalued” the company. Calgary-based Suncor offered 0.25 of its own shares for each one of Canadian Oil Sands as the company seeks to boost its stake in the Syncrude bitumen mine to 49 percent from 12 percent.

At the start of December, the Alberta Regulators Commission granted an extension to Canadian Oil Sands’ shareholders to allow the company and its board to consider other offers. At the time, the company said it had four other “credible parties” sign confidentiality agreements to weigh a bid. No other offers have materialized since then.

Canadian Oil Sands has the financial resources to weather the current downturn, as well as cover operating costs and pay its dividend in a lower oil price environment, Lowry said in the letter published Monday. He reiterated the company’s goal to reduce its cost by 20 percent in 2016.

Cut Costs

“You invested in Canadian Oil Sands for a pure-play exposure to oil prices, and you have held your investment through unprecedented hard times in the energy sector,” he said. “Now is the time to secure the future benefits of an independent Canadian Oil Sands.”

If successful, Suncor would move quickly to eliminate Canadian Oil Sands’ administration costs and devote the resources necessary to work with the partners at Syncrude to achieve what could be real and lasting operational improvements, Suncor’s Williams said.

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