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Suncor Reaches Friendly C$4.24 Billion Deal for Canadian Oil Sands

Blog Post created by katie.mehnert Champion on Jan 18, 2016

Suncor Reaches Friendly C$4.24 Billion Deal for Canadian Oil Sands

Suncor raised its takeover offer to 0.28 of a share

Judy McKinnon, Wall Street Journal

 

The Syncrude Canada Ltd. oil sands mine near Fort McMurray in Canada’s Alberta province is shown in June. Canadian Oil Sands Ltd., the largest owner of the Syncrude consortium, is to be acquired by Suncor Energy Inc. PHOTO: BEN NELMS/BLOOMBERG NEWS

Suncor Energy Inc.http://quotes.wsj.com/SU and Canadian Oil Sands Ltd.http://quotes.wsj.com/COSWF confirmed Monday that they had reached a friendly deal after Suncor agreed to raise its takeover offer for its rival to about 4.24 billion Canadian dollars ($2.92 billion).

 

The two Canadian energy companies had been working on a revised bid since Friday, a person familiar with the matter told The Wall Street Journal, and a new bid had been expected as early as Monday.

 

The new all-stock offer, which boosts the overall bid value from about C$3.78 billion, consists of 0.28 of a Suncor share for each Canadian Oil Sands share, up from 0.25 of a share previously.

 

The companies value the new bid at about C$6.6 billion, including estimated debt of about C$2.4 billion.

 

Canadian Oil Sands, the largest owner of the giant Syncrude oil-sands mining consortium in Alberta, had called Suncor’s previous all-stock offer too low. Suncor, which also owns a stake in Syncrude, had said its offer was fair, particularly since crude prices have been tumbling amid concerns about excess supply and slowing global demand. Nonetheless, Suncor had been under pressure to sweeten its bid after it earlier this month extended the deadline for acceptance of its bid.

 

The boards of both companies support the revised bid, they said in a joint release.

“We believe this transaction delivers excellent value to COS shareholders while maintaining Suncor’s commitment to capital discipline,” Suncor Chief Executive Steve Williams said. He noted that Canadian Oil Sands shareholders, including Canadian billionaire Seymour Schulich, who previously opposed the deal, support the revised offer.

“I will be tendering my shares,” Mr. Schulich said in the release. He owns about a 5.2% stake in Canadian Oil Sands and opposed the previous offer.

Canadian Oil Sands had called the former offer inadequate and had been asking its shareholders to allow it to remain an independent company.

“Our shareholders clearly signaled they expected more for their COS shares, and the board has worked to secure that under very challenging circumstances,” said Don Lowry, chairman of Canadian Oil Sands.

The revised offer, which will remain open until Feb. 5, is subject to at least 51% of Canadian Oil Sands’ shares being tendered and includes a C$130 million breakup fee payable by Canadian Oil Sands under certain circumstances if the deal isn’t completed.

—Ben Dummett contributed to this article.

Write to Judy McKinnon at judy.mckinnon@wsj.com

 

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