Last day for COS shareholders to decide on Suncor Energy hostile takeover bid

CALGARY -- Shareholders in Canadian Oil Sands have until this evening to decide whether to accept a takeover offer from Canada's dominant oilsands producer.

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Suncor's Energy's hostile all-stock bid, worth just over $4 billion, expires at 6 p.m. MT on Friday. It needs two-thirds support to go through.

COS shares closed at $7.47 on the Toronto Stock Exchange on Friday, about 10 per cent below the value of the bid based on Suncor's closing share price Friday.

Suncor has said the likelihood of an improved offer was negligible, adding that it was prepared to walk away and move on to other opportunities if it didn't garner enough support by the deadline.

At the crux of the battle is the outlook for oil.

U.S. benchmark crude settled at a paltry US$33.16 a barrel on Friday.

COS is focused entirely on its 37 per cent share of the Syncrude oilsands mine north of Fort McMurray, Alta., making it particularly exposed to swings in commodity prices.

Suncor, whose 12 per cent stake in Syncrude represents a small slice of its oilsands holdings, believes oil prices will remain low for a long time and says COS shareholders face an uncertain future if they say reject the deal.

The leadership of COS says the best way forward is for it to stay independent and that it's poised to prosper once crude prices recover.

Bradley Freelan, a partner at law firm Fasken Martineau who focuses on mergers and acquisitions, said there are a number of possible scenarios that could play out once the deadline passes.

  • The bid simply lapses. "The deadline happens, not enough shares are tendered and Suncor just lets the bid expire in accordance with its terms and that's it."
  • Suncor gets some support, but not enough to close the deal. Suncor extends the bid in its current form for 10 days in the hope enough shareholders decide to jump on board to get it past the finish line.
  • Suncor gets a strong level of support, but is still shy of the two-thirds requirement. The company amends its offer to waive the two-thirds condition and extends it.
  • More than two-thirds of COS shares are tendered to the bid and Suncor acquires its target.
  • A friendly deal between the two companies is announced: a possible, but by no means probable, outcome.
  • A last-minute white knight bidder emerges. This would seem to be a remote possibility. The Alberta Securities Commission in December decided to give COS another month to stave off Suncor's offer with what's known as a "poison pill" defence. In that time, no alternative deal has emerged despite COS having said that 25 other parties had shown some degree of interest.

It may be a little time before Suncor announces its next move.

"I will watch with very close attention as the tenders come in," CEO Steve Williams said on a conference call this week. "We'll make the judgment through the weekend as to whether we believe we will be able to move to closing the deal out."



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