In recent days, Suncor offered 0.25 shares for every share of Canadian Oil Sands.
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“The board will consider Suncor’s unsolicited offer in both the current context and in light of the strong long-term potential of Canadian Oil Sands”, Chairman Donald Lowry said in a statement.
“The Board of Directors of Canadian Oil Sands together with its advisors will review the Suncor offer and related take-over bid circular and will communicate a recommendation to shareholders as soon as possible”, COS said.
The deal would also increase Suncor’s stake from 12% to 48.74% in the 326,000 barrel per day Syncrude mining and upgrading project in the Athabasca oil sands region near Fort McMurray, Alberta.
“We’re disappointed but not surprised by COS board’s decision to adopt a new board approved shareholder rights plan in the face of our offer”, CEO Steve Williams said in a statement.
Suncor (TSX:SU) announced on Monday it would be taking its offer directly to COS shareholders following two rebuffed attempts.
The outlook for crude prices has deteriorated since Suncor’s earlier attempts. “We’re confident in the value this Offer provides to COS shareholders”, Williams added.
Suncor, also Calgary-based, is an integrated energy company focused on Canada’s oil sands development.
Analysts were split on whether the deal was a good one for Canadian Oil Sands’ shareholders. CIBC reduced their price objective on Canadian Oil Sands from C$8.50 to C$8.00 and set a “sector outperform” rating on the stock in a report on Thursday, September 3rd. raised Canadian Oil Sands from an “underperform” rating to a “sector perform” rating and increased their target price for the company from C$8.00 to C$9.00 in a research report on Tuesday, August 4th. This would be the second-largest deal for Suncor, after its purchase of Petro-Canada. Zacks upgraded Suncor Energy from a hold rating to a buy rating and set a $32.00 price target on the stock in a report on Wednesday, June 24th. Suncor’s dividend yield is 3.3 percent, compared with 2.5 percent for Canadian Oil Sands, based on Friday’s close.
JP Morgan Securities LLC is acting as financial advisor and Blake to Suncor in connection with the offer while Cassels & Graydon LLP and Sullivan & Cromwell LLP are its legal advisors.
The offer is subject to customary closing conditions including tendering of two-thirds of the outstanding COS shares, and regulatory approvals. Other oil companies may come calling with an offer of their own, for example, which could kick off a bidding war.
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“If oil prices go back to $60 there’s plenty of room for that”, said Pelletier, who bought Canadian Oil Sands shares recently betting on a takeover and is in the money on the stock’s gain. The Organization operates in three business segments: Oil Sands, Exploration and Production, and Refining and Marketing.
