TORONTO (miningweekly.com) – The TSX-listed stock of Canadian Oil Sands (COS) closed more than 55% higher at C$9.60 apiece on Monday, after rival Suncor Energy launched a C$4.3-billion hostile takeover bid.
Under terms of the offer, each COS shareholder would receive one-quarter of a Suncor share, or about C$8.84, for each share tendered. Including COS's estimated outstanding net debt of $2.3-billion, as at June 30, the transaction was valued at about C$6.6-billion.
Owing to COS’s stock closing above the offer price on Monday, market spectators were either expecting Suncor to come forward with a sweetened offer, or another rival active in the Northern Alberta-based oilpatch to step forward with a competing bid.
COS held a 36.74% stake in one of the largest oil sands operations north of Fort McMurray and Suncor owned 12%. Other Syncrude partners included Imperial Oil (25%), Sinopec (9.03%), Nexen (7.23%) and Murphy Oil and Mocal Energy, each owning 5%.
The latest offer, despite being about 25% lower than a previous Suncor offer, represented a premium of 43%. This was based on the closing prices of the COS shares and the Suncor shares on the TSX on Friday, the last trading day before the offer was announced, and a 35% premium to the volume weighted average trading price of the COS shares on the TSX for the 30 trading days also ended on Friday.
Suncor had earlier this year, when Western Texas Intermediate oil was trading above $50/bl, unsuccessfully approached the COS board twice with offers. Since April 9, when the second offer with an implied value of C$11.84 a share was lodged, oil had dropped about 17%, to close on Monday at $46.60/bl.
The COS board on Monday responded, urging shareholders not to take action on the proposal until it had had time to fully review the offer and make a recommendation as to its merits.
Subject to withdrawing or extending the deal, the offer would remain open for 60 days, expiring December 4. The deal required the support of two-thirds of COS’s shareholders.