Scotiabank Lowers Canadian Oil Sands Price Target to C$10.00 (COS)

Under the terms of the Offer, each COS shareholder will receive consideration of 0.25 of a Suncor share per COS share.

The offer price represents a 43 per cent premium on last week’s closing prices and a 35 per cent premium on COS’ share value over the last month.

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Low oil prices have hurt Suncor less since it is an integrated oil company with refineries and retail operations. “My feeling was that having reflected and still seen great benefits for both sets of shareholders, I thought the only way then to take it ahead was to make the offer directly to their shareholders”.

Canadian Oil Sands is expected to reject the offer, according to a person familiar with the Calgary-based company’s thinking who asked not to be identified because the matter is private.

October 5 (Reuters) – Suncor Energy launched what could be a drawn-out takeover battle for Canadian Oil Sands Ltd on Monday, which could increase its stake in Alberta’s massive Syncrude project and cement its position as the country’s largest oil producer.

The company said the offer will be open till December 4, unless extended or withdrawn. “Everything’s on the table when you do a hostile like this”. Advisers previously retained by the company will assist it now, including Royal Bank of Canada, Osler, Hoskin & Harcourt LLP and Kingsdale Shareholder Services, according to a statement from the company.

Before today’s price surge, Canadian Oil Sands had plunged along with oil prices. It has four segments: oil sands, conventional, refining and marketing, and corporate and eliminations.

Oil prices gained $1.27 a barrel to $46.81 U.S. On the Toronto Stock Exchange, Suncor shares were down 80 cents of 2.26 per cent at $34.56 at midafternoon, while COS stock jumped $3.03 or nearly 50 per cent to $9.22. The stock had dropped 41 percent this year through Friday, compared with a decline of 4.2 percent for Suncor.

BMO’s Randy Ollenberger said an Imperial bid was unlikely since Syncrude is situated next to Suncor’s existing oil sands operations, giving it the opportunity to generate more cost savings than Imperial could. But in an interview Monday, he said he doesn’t think Imperial will make a competing bid.

Suncor has been scouting for assets and in September bought a tenth of the Fort Hills oil sands project in northern Alberta from French oil company Total.