October 7, 2015 / 2:00 PM / 3 years ago

Canadian Oil Sands adopts poison pill to fend off Suncor

CALGARY (Reuters) - Canadian Oil Sands Ltd on Wednesday announced a new poison pill to try to thwart Suncor Energy Inc’s hostile takeover bid, setting the stage for a drawn-out battle that could reshape Alberta’s high-cost oil sands industry.

Canadian Oil Sands said its board had implemented the poison pill, or shareholder rights plan, in addition to an existing one to give investors enough time to weigh up Suncor’s offer or other takeover bids or strategic alternatives that might arise.

Suncor, Canada’s largest oil producer, made an unsolicited all-stock offer to acquire Canadian Oil Sands on Monday, valuing it at about C$4.3 billion (3.29 billion). A successful deal would give Suncor control of nearly half of the Syncrude oil sands project, Canada’s largest single-source producer of synthetic oil.

Shares of both companies were up more than 1 percent on Wednesday.

“The board will consider Suncor’s unsolicited offer in both the current context and in light of the strong long-term potential of Canadian Oil Sands,” Chairman Donald Lowry said in a statement.

Suncor said it was disappointed but not surprised by Canadian Oil Sands’ decision to adopt a new shareholder rights plan in response to its offer.

“This inappropriate defensive tactic limits the ability of COS shareholders to decide,” Suncor Chief Executive Steve Williams said.

If triggered, the new plan would give Canadian Oil Sands shareholders other than the potential buyer the right to buy new stock at a substantial discount to the market price. The resulting dilution is designed to fend off unwanted takeover bids.

“We view this change to the Shareholder Right Plan as being extremely detrimental to Suncor’s unsolicited bid for Canadian Oil Sands,” AltaCorp Capital Research analyst Nicholas Lupick said.

The new plan also extends the duration of a permitted bid to 120 days, preventing Suncor’s offer, which expires in early December, from being considered unless it is extended.

“Suncor’s recent offer is substantially less than the proposal rejected by the board in April 2015,” Canadian Oil Sands said in its statement on Wednesday.

The company said Suncor initially approached it in March with a letter containing no offer and then gave the board a non-binding expression of interest in April.

Canadian Oil Sands said it rejected that proposal because the implied price was below its share price of C$12.96 at that time. The stock traded at C$9.39 on Wednesday.

Additional reporting by Anet Josline Pinto in Bengaluru; Editing by Lisa Von Ahn and Christian Plumb

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