Suncor Reaches Deal To Buy Canadian Oil Sands With Sweetened Offer

Canada’s largest oil producer Suncor Energy Inc. has reached a deal to acquire rival Canadian Oil Sands Ltd. Monday by raising its all-stock offer, a move seen marking the end of a months-long battle for the synthetic crude asset. Valued at about C$4.24 billion ($2.93 billion), the deal came days after Suncor’s hostile bid fell short of support from Canadian Oil Sands shareholders.

Canadian Oil Sands’ shares rose about 11 percent, while Suncor fell about 5 percent in Monday intraday trading in Canada.

Oil-sands producers have been struggling with tumbling global crude-oil prices, which have slid to their lowest levels since 2003 over worries of a global supply glut.

Suncor will now offer Canadian Oil Sands shareholders 0.28 of a Suncor share for each share held, up from its initial bid of 0.25 shares. The new offer values Canadian Oil Sands at C$8.74 per share, a premium of nearly 17 percent over the closing price of both stocks Friday.

In response to the hostile bid, Canadian Oil Sands had adopted a shareholder-rights plan that acted as a poison pill, and urged investors to reject the offer.

Seymour Schulich, a major Canadian Oil Sands investor who had opposed the initial bid, said he was satisfied with the outcome. “It’s the best we could do in the environment we’re in. I wish we had a better environment, but we didn’t,” he said in an interview. The owner of 5 percent of Canadian Oil Sands shares, Schulich was involved with the deal negotiations. “They’re going to get an overwhelming majority of the shares now.”

Accounting for Canadian Oil Sands’ C$2.4 billion debt, the deal is valued at about C$6.6 billion.

With the takeover, Suncor’s 12-percent stake in Syncrude, the oil-sands mining consortium in northern Alberta in which Canadian Oil Sands has a 36.7-percent stake, would rise to 49 percent.

“It makes sense from the standpoint that Suncor has a lot of value to add to Syncrude,” said Scott Vali, portfolio manager and vice president of equities at CIBC Asset Management, one of the biggest shareholders in COS. “It’s a fair price for all parties involved.”

JP Morgan and CIBC World Markets are financial advisers to Suncor, while Blake, Cassels & Graydon LLP and Sullivan & Cromwell LLP are its legal advisers.

RBC Capital Markets, Osler, Hoskin & Harcourt LLP and Norton Rose Fulbright Canada LLP are advising Canadian Oil Sands.

D.F. King provided Suncor with proxy solicitation advice, and Kingsdale advised Canadian Oil Sands.