Calls on shareholders to not accept the “exploitive” $4.3 billion offer.
October 19, 2015
by CANADIAN PRESS
CALGARY — The board of Canadian Oil Sands Ltd. (COS) is telling shareholders to reject Suncor Energy’s $4.3-billion takeover offer, calling the hostile bid “exploitative.”
Board members have unanimously decided the hostile bid, made two weeks ago, is not in shareholders’ best interests, COS said.
“Your board’s objective is to maximize value for shareholders, not to sell you out at fire sale prices,” chairman Donald Lowry said on a conference call, which didn’t take questions.
The COS board accused Suncor of taking advantage of “unprecedented” turmoil in the energy industry – not just because of the crude downturn, but also because of political and regulatory uncertainty.
Both companies are partners in the Syncrude oil sands mining venture north of Fort McMurray Alta. – COS the largest co-owner with a 37% stake and Suncor with 12%.
COS CEO Ryan Kubik said the Suncor bid ignores Syncrude’s ability to process tarry oilsands bitumen into more valuable synthetic crude oil that can easily be refined.
“In other words, Suncor is asking you to give them your upgrader for free,” Kubik said.
Kubick also said the Suncor bid does not account for an eventual recovery in oil prices, which are about half what they were in mid-2014
“Our shareholders bought Canadian Oil Sands for good reasons. They understand the downside of oil prices and they don’t want to give up the tremendous upside,” said Kubik.
“We believe Canadian Oil Sands can weather this period of low oil prices and come out stronger.”
Kubik also said Suncor is exploiting inside information it has about improvements to Syncrude’s operations that haven’t been reflected in the COS share price.
“They understand the improvements already underway and want to take credit for them,” he said.
Suncor CEO Steve Williams, who has said his company may look to scoop up assets at bargain prices thanks to the prolonged downturn in oil prices, says that none of COS’s reasons for rejecting the bid detracts from its “compelling” value.
“Our offer reflects the new business reality and when proposed, included a substantial price premium of 43% and a dividend increase of 45%,” Williams said in an e-mailed statement.
“It also represents an opportunity for investment in a financially stronger, more diversified and stable company that has considerable upside potential in a rising price environment, but can also deliver significant value should oil prices stay lower for longer.”
Suncor approached COS in the spring with an offer that was at the time worth $11.84 a share. Kubik described that offer as “barely credible” and a “takeunder” rather than a takeover.
The current all-stock bid, which has been taken directly to COS shareholders, was worth $8.84 a share when it was made on Oct. 5.
COS has enacted a new shareholder rights plan – also known as a poison pill defence – to dissuade Suncor from buying up its target’s shares.
The COS board and its advisers are continuing to look at other options, ranging from remaining an independent company to a deal with another firm.
© 2015 The Canadian Press