Suncor Said to Near Deal With Canadian Oil Sands for Merger

  • Deal would give Suncor 49% stake in Syncrude oil-sands project
  • Suncor's C$3.78 billion hostile offer expires Jan. 27

Suncor Energy Inc. and Canadian Oil Sands Ltd. are close to a deal, ending a stalemate after Canadian Oil Sands rejected a C$3.78 billion ($2.6 billion) hostile takeover bid from the country’s biggest oil producer, according to people with knowledge with the discussions.

The companies have been speaking in recent days, said the people, who asked not to be identified because the discussions are private. Suncor’s offer of 0.25 Suncor share for each of Canadian Oil Sands’s expires on Jan. 27. The advanced talks were first reported by the Wall Street Journal.

Suncor is seeking to increase its stake in the Syncrude Canada oil-sands joint venture to 49 percent from 12 percent, making it the largest shareholder. The company is working to lower costs at its operations as the industry faces the lowest crude prices in more than a decade. The slump has cost more than 40,000 Canadian workers their jobs and halted expansion plans.

Sneh Seetal, a spokeswoman for Suncor, didn’t respond to e-mail or calls to her mobile phone. Siren Fisekci, a spokeswoman for Canadian Oil Sands, didn’t respond to e-mail request for comment.

Canadian Oil Sands shares fell 2.1 percent to C$7.48 Friday. Suncor declined 3.6 percent to C$31.22, valuing the deal at a premium of 4.3 percent.

Turning Hostile

Suncor’s attempt to take over its partner in Syncrude turned hostile in October, months after Suncor’s Chief Executive Officer Steve Williams approached Canadian Oil Sands’ CEO Ryan Kubik with two different offers. A war of words followed, with Kubik arguing that his company was better off independent, while Williams countered that his forecast for the price of oil staying “lower for longer” meant shareholders would be better served owning Suncor shares.

Oil’s crash has weighed on shareholders since the hostile bid was first announced on Oct. 5 and West Texas Intermediate was trading around $45 a barrel. The U.S. benchmark has since tumbled more than 35 percent and sank below $30 for the first time in 12 years on Jan. 12. Prices on Monday fell as much as 3.6 percent to $28.36 on the New York Mercantile Exchange.

Some shareholders, including Seymour Schulich and Burgundy Asset Management, have argued that Suncor’s offer is too low. Between 40 percent and 50 percent of shareholders opted to accept the offer by Jan. 8, the most recent deadline, people familiar with the matter said at the time. That was short of the two-thirds of the shares Suncor is seeking.

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