Canadian Oil Sands Rejects Suncor Offer

Canadian Oil Sands Limited (COS.TO) or COS said its Board of Directors is recommending that shareholders reject the offer by Suncor Energy Inc. It is meant to take advantage of unprecedented conditions in the energy industry. The target company says that “substantially undervalues” what COS is worth, and calls the bid “exploitive”.

The COS board and its advisers are continuing to look at other options, ranging from remaining an independent company to merging or partnering with another firm. The company also alleged Suncor is aware of several yet-to-be-disclosed cost-reduction and value-enhancing initiatives at Syncrude that aren’t reflected in the bid.

A representative for Suncor wasn’t immediately available for comment outside business hours.

Suncor has offered to buy COS in exchange for one-quarter of a Suncor share for every COS share.

Suncor, Canada’s largest oil producer, has a 12% interest in Syncrude.

The formal rejection Monday comes less than two weeks after Canadian Oil Sands adopted a so-called poison pill plan in response to Suncor’s all-stock offer. The stock rebounded past C$10, the highest since June, and closed last week at C$9.94.

Canadian Oil Sands said the larger rival’s unsolicited bid was “wholly inadequate”, adding it has less value than the current market price.

In September, Suncor bought a tenth of the Fort Hills oil sands project in northern Alberta from French oil company Total. The transaction for those assets, which neighbour the Syncrude reserves, was valued at roughly $56,000 a barrel per day.

Suncor also owns a stake in Syncrude.