Suncor Energy Launches Hostile C$4.3 Bln Bid For Canadian Oil Sands

(RTTNews) - Canadian oil and gas company Suncor Energy Inc. (SU, SU.TO) said Monday that it has offered to acquire oil-sands producer Canadian Oil Sands Ltd. (COSWF, COS.TO) for about C$4.3 billion, or $3.28 billion, in an all-stock deal.

Under the terms of the unsolicited offer, shareholders of Calgary-based Canadian Oil Sands or COS will receive consideration of 0.25 of a Suncor share for each COS share held by them. The offer price represents a 43 percent premium to COS' closing stock price on the Toronto Stock Exchange on Friday, October 2, 2015.

Including COS' estimated outstanding net debt of C$2.3 billion as at June 30, 2015, the total transaction value will be about C$6.6 billion. Suncor Energy said that the offer will be open for acceptance until December 4, 2015, unless extended or withdrawn.

Steve Williams, Suncor's president and CEO said, "We believe this is a financially compelling opportunity for COS shareholders. By accepting this Offer, COS shareholders will become investors in Canada's leading integrated energy company with 50 years of experience in oil sands operations and a track record of returning significant value to shareholders."

Suncor noted that its annual dividend has increased for the 13 consecutive years and if COS shareholders accept its offer, they would get a 45 percent dividend uplift.

Canadian Oil Sands is the biggest partner in the Syncrude oil sands development in northern Alberta, with a 36.7 percent stake. Through its interests in the Syncrude joint venture, it produces and sells synthetic crude oil and non-declining crude oil reserves.

However, the company, which is struggling with falling stock prices and rising debt, has said it is looking at selling some of its future production from the joint venture.

Meanwhile, the acquisition would enable Suncor Energy to boost its presence in the Canadian oil sands.

The company said in mid-September that it agreed to buy an additional 10 percent working interest in the Fort Hills oil sands project in Alberta from Total E&P Canada Ltd. for C$310 million. Upon closing, Suncor's partnership share in the C$15 billion project will increase to 50.8 per cent.

J.P. Morgan Securities LLC is acting as financial advisor to Suncor, while Blake, Cassels & Graydon LLP as well as Sullivan & Cromwell LLP are acting as its legal advisors in connection with the offer.

SU closed Friday's trading at $26.86. In Monday's pre-market activity, the stock is down $0.76 or 2.83 percent to $26.10.

On the Toronto Stock Exchange, COS.TO closed Friday's trading at C$6.19, down C$0.01 or 0.16 percent on a volume of 3.49 million shares.