Suncor Energy makes $4.3B bid for Canadian Oil Sands

Each Canadian Oil Sands shareholder will receive 0.25 of Suncor shares for each share held, the company said on Monday.

The offer value is 43 percent above the market value for Canadian Oil Sands (TSX:COS), based on closing prices at the Toronto Stock Exchange on Friday.

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Suncor said it was well-positioned to benefit from the offer because of integrated operations that include a refinery in Montreal.

This new offer will give shareholders $8.84 per share. The 52-week high of the share price is $26.44 and the company has a market cap of $12,799 million.

During the last oil industry downturn in 2009, Suncor also went shopping, absorbing Petro-Canada in a blockbuster deal.

The tender offer for Canadian Oil Sands will be open until December 4 unless extended or withdrawn, the company said. Canadian Oil Sands was the most actively traded stock.

The Calgary-based company says it’s offering Suncor shares worth about $4.3 billion and would take on about $2.3 billion of debt owed by Canadian Oil Sands, making the total transaction worth $6.6 billion. Still, with oil prices remaining depressed, the Canadian economy is expected to continue to struggle. Its largest shareholders are institutional investors.

But a source familiar with the matter, who is not authorized to publicly discuss the bid, said that Canadian Oil Sands is set to reject the Suncor proposal. “Everything’s on the table when you do a hostile like this”.

Canadian Oil Sands and Suncor are among stakeholders in Canada’s largest synthetic crude project, Syncrude, in northern Alberta. “Canadian Oil Sands is going to look at everything”.

On the commodity markets, the November contract for benchmark crude oil was up 69 cents at US$46.23 a barrel, while November natural gas was unchanged at US$2.45 per thousand cubic feet. The stock had dropped 41 percent this year through Friday, compared with a decline of 4.2 percent for Suncor.

Lau said she doubts the two Chinese-controlled firms with Syncrude stakes – Sinopec with nine per cent and CNOOC-owned Nexen with seven per cent – would have much of an appetite to grow their share, given Ottawa’s hurdles to foreign state-owned investment in the oilsands.

To contact the reporters on this story: Scott Deveau in Toronto at sdeveau2@bloomberg.net; Jeremy van Loon in Calgary at jvanloon@bloomberg.net To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Carlos Caminada, Jeffrey Taylor. All comments are subject to editorial review.