Suncor Energy launches $4.3 billion hostile bid for Canadian Oil Sands

Mon Oct 5, 2015 6:21pm EDT
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By Nia Williams and Amrutha Gayathri

(Reuters) - Suncor Energy Inc launched a hostile bid for Canadian Oil Sands Ltd on Monday, aimed at boosting its stake in the country's biggest synthetic crude project and cementing its position as the country's largest oil producer.

Canadian Oil Sands shares rose 55 percent to C$9.60 on the TSX, well above Suncor's implied offer price, suggesting investors expect a rival bid or sweetened offer to emerge.

A source familiar with the matter, who is not authorized to publicly discuss the bid, said that Canadian Oil Sands is set to reject the offer. Canadian Oil Sands urged shareholders not to act on the all-share offer as it reviews the bid.

Bankers and investors said the bid is unlikely to launch a wave of consolidation in Canada's oil sands industry, which has some of the world's highest operating costs and lowest prices, as many companies are wary of doing deals while the outlook for oil prices remains uncertain.

The offer, valued at about C$4.3 billion ($3.29 billion), comes as slumping oil prices squeeze Canadian oil sands producers.

A successful deal would lift Suncor's stake in the Syncrude oil sands project, the largest single-source producer of oil in Canada, from 12 percent to 48.74 percent. The project produced just over 300,000 barrels per day of light, sweet synthetic crude in August.

Suncor Chief Executive Steve Williams said the company approached Canadian Oil Sands in March and April with proposals, both of which were rejected.

"We still think the case is compelling," he said in an interview on Monday. "This deal is not conditional on this being the bottom (for oil prices). We have actually looked at a case where it stays lower for longer and even in these market conditions we've been producing free cash."   Continued...

Steve Williams, president and CEO of Suncor Energy Inc., speaks at their annual general meeting in Edmonton April 29, 2014.   REUTERS/Dan Riedlhuber