Suncor raises bid for Canadian Oil Sands, gets $6.6B deal
Sweetened offer leads to agreement after high-profile shareholder Seymour Schulich urged rejection
Suncor Energy and Canadian Oil Sands have come to terms on a $6.6-billion deal that ends a public feud between the two Calgary-based companies.
Suncor will offer 0.28 of its own shares for every COS share it buys. That's a higher return than their last offer, which was 0.25 shares each.
Because the offer is primarily an exchange of shares, its monetary value will fluctuate. Based on Friday's closing stock price for Suncor stock, the new offer was worth $8.74 per COS share, up from $7.81 under the original formula.
The stock portion would be worth $4.2 billion, up from $3.8 billion under the old formula, if all COS shares are tendered. The total value of the deal includes $2.4 billion in debt that Suncor will assume.
The two companies issued a joint statement saying both boards approve the tie-up. That's a departure from before, when Suncor went public with an offer after COS privately rebuffed them then urged shareholders to do the same.
The new pact has the OK of Canadian Oil Sands investor Seymour Schulich too. That's a significant get because Schulich had campaigned against the previous Suncor bid and bought full-page ads in several major newspapers to advise fellow shareholders to reject the price they were originally offered.
Schulich said in the same statement that he encouraged other COS shareholders to join him in accepting the new offer, which is still subject to certain conditions.
The offer expires at 4 p.m. MT (6 p.m. ET) on Feb. 5 — nine days later than the Jan. 27 deadline that Suncor set after its original bid failed to win sufficient support from COS shareholders.
Schulich encourages acceptance
"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," Don Lowry, chairman of Canadian Oil Sands, said Monday.
Schulich said in the same statement that he encouraged other COS shareholders to join him in accepting the new offer, which is still subject to certain conditions.
Suncor wants at least 51 per cent of the COS shares — a relaxed condition since the original had sought at least 66.6 per cent. The Canadian Oil Sands board has agreed to pay a $130 million break fee to Suncor if certain conditions aren't met.
If accepted, Suncor will become by far the largest shareholder in the Syncrude oilsands complex, which is operated by Imperial Oil.
"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" Suncor president and CEO Steve Williams said.
"Together, we're bringing this full, fair and final offer to COS shareholders and we encourage everyone to tender their shares."
Some think the deal could kick off a round of consolidation in Canada's oil patch, as valuations are at all-time lows which means there could be bargains to be had for well-capitalized larger players.
"It points to the consolidation trend that comes with an economic downturn," said Michal Moore, a professor of Energy Economics with the University of Calgary's School of Public Policy.
"I think there's probably more to come," he said.
With files from The Canadian Press