CALGARY - Suncor Energy is looking to add another big chunk to its vast oilsands holdings — and take advantage of a prolonged rout in crude prices — with an unsolicited takeover bid for Canadian Oil Sands Ltd., the largest partner in the Syncrude mine north of Fort McMurray, Alta.
Suncor (TSX:SU) said Monday it's offering $4.3 billion in its own shares and would take on about $2.3 billion of debt owed by Canadian Oil Sands, making the total transaction worth $6.6 billion.
Suncor says the offer would give shareholders of Canadian Oil Sands a stake in Canada's largest integrated energy company, which includes the Petro-Canada chain of fuel stations as well as its own oil and gas production and refining operations.
The offer value is also 43 per cent above the market value for Canadian Oil Sands (TSX:COS), based on closing prices at the Toronto Stock Exchange on Friday.
Canadian Oil Sands stock shot up nearly 50 per cent amid speculation that a rival offer may emerge while Suncor shares dipped slightly in early trading.
Suncor said its offer will be open until Dec. 4, although it could be withdrawn or the deadline could be extended.
"We believe this is a financially compelling opportunity for COS shareholders," Steve Williams, Suncor's president and chief executive officer, said in a statement.
"We're offering a significant premium to COS' current market price and also providing exposure to a meaningful dividend increase. We're confident in the value this Offer provides to COS shareholders."
The offer hasn't been accepted by the Canadian Oil Sands board.
On a conference call, Williams said Suncor made a few overtures to its target in the spring, but was rebuffed.
Crude oil prices have declined by 17 per cent since then, now sitting well below US$50 a barrel. The share price value of Canadian Oil Sands has been dragged down with it, Williams noted.
"There is now a broad consensus among analysts and industry experts that we are in a structurally 'lower for longer' oil price world," said Williams.
"We remain convinced there are significant benefits to a transaction for all interested parties. However, given the deterioration of market conditions and the more pessimistic prevailing view on an oil price recovery, we believe the value of COS has declined since the previous offer was made."
Suncor went shopping during the last major crude downturn in 2009, absorbing Petro-Canada in a blockbuster deal.
Canadian Oil Sands is a widely held company, with no shareholder owning more than six per cent of the common shares according to public data compiled by Thomson Reuters. Its largest shareholders are institutional investors.
Canadian Oil Sands has a 37 per cent stake in the Syncrude oil sands operation and Suncor owns 12 per cent. Othar Syncrude partners are: Imperial Oil (TSX: IMO) with 25 per cent, Sinopec (nine per cent), Nexen (seven per cent), Murphy Oil and Mocal Energy (five per cent each.)
According to Thomson Reuters data, TD Asset Management is the largest shareholder in Canadian Oil Sands, with about five per cent of COS common stock. Other investors include funds managed by Franklin, Deutsch Asset & Wealth, CIBC, Blackrock and Vanguard.
Suncor is offering one-quarter of a Suncor share per COS share. In the first minutes of trading Monday, Suncor shares were down 87 cents at $34.50, making its offer worth nearly $8.63 at the time. COS shares were trading at $9.10.
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