Canadian Oil’s Shareholder Rights Plan Approved Amid Suncor’s Bid

“We believe this is a financially compelling opportunity for COS shareholders”, Steve Williams, Suncor’s President and CEO, said in a statement. Scotiabank cut their price target on shares of Canadian Oil Sands from C$11.00 to C$10.00 in a report on Tuesday, September 29th. raised shares of Canadian Oil Sands from an underperform rating to a sector perform rating and increased their price target for the company from C$8.00 to C$9.00 in a research report on Tuesday, August 4th.

Under the terms of the offer, COS shareholders will receive consideration of 0.25 shares of Suncor per COS share or about C$8.84 representing a 43-per cent premium based on the closing prices of the shares on 2 October, the last trading day before the announcement of the offer, according to a Suncor statement.

The outlook for crude prices has deteriorated since Suncor’s earlier attempts.

Shares of Canadian Oil Sands (TSE:COS) traded down 3.33% during midday trading on Tuesday, hitting $9.28.

“We’re offering a significant premium to COS’ current market price and also providing exposure to a meaningful dividend increase”.

“They said they weren’t interested in pursuing a negotiated outcome”, Williams said in a phone interview.

Shares of Canadian Oil Sands pared the price surge that followed the bid, falling 3.3% to C$9.28 in Toronto on Tuesday.

Suncor (TSX:SU) announced on Monday it would be taking its offer directly to COS shareholders following two rebuffed attempts. The company noted it will consult with a number of financial advisers on the deal.

Suncor revealed it had approached Canadian Oil Sands in the spring of this year, but the overtures were not well received. This would be the second-largest deal for Suncor, after its purchase of Petro-Canada. Suncor has a 12 per cent interest in the development. With the downdraft in oil prices over the past year, Canadian Oil Sands has taken a real beating because it holds the largest stake in the project.

Besides, COS shareholders would get 45-per cent dividend uplift by virtue of Suncor’s high annual dividend growth rate of over 20 per cent. Suncor’s dividend yield is 3.3 percent, compared with 2.5 percent for COS. Suncor was advised by JP Morgan Chase & Co. and Blake, Cassels & Graydon LLP.

Canadian Oil Sands said the offer announced this week is substantially less than a proposal rejected by the board in April 2015.

Suncor’s unsolicited offer is surprising because hostile bids are uncommon in Canada and it comes before many were expecting mergers and acquisitions to pick up, saidMartin Pelletier, managing director and portfolio manager at TriVest Wealth Counsel Ltd.in Calgary. That means there’s little relief in sight for the cash-squeezed companies operating in one of the world’s most expensive places to extract crude, even as oil climbed to a one-month high Tuesday. He says that mutual funds that own energy stocks may see gains when oil normalizes back to more reasonable levels. “Canadian Oil Sands is going to look at everything”.