Suncor buys Canadian Oil Sands for $6.8bn


Financier Worldwide Magazine

March 2016 Issue

March 2016 Issue

In an agreement which ends a public feud between two Calgary-based companies, Suncor Energy Inc. and Canadian Oil Sands (COS) Limited have announced that they will support a fresh offer made by Suncor to purchase all COS shares.

Under the terms of the agreement, Suncor will amend its previous offer to COS shareholders to reflect an increase to 0.28 of a Suncor share for each COS share. This amended offer, which has a total aggregate transaction value of approximately $6.6bn including COS’ estimated debt of $2.4bn, has the full support of the board of directors of both companies.

Concurrently, the COS board has received an opinion from its financial adviser, RBC Capital Markets, that, from a financial point of view, advises that the amended offer to COS shareholders is a fair one. Furthermore, the COS board has determined that the offer is in the best interests of COS and recommends that shareholders tender accordingly.

Additionally, the agreement between Suncor and COS contains provisions for the suspension of dividends in the first quarter of 2016 by COS, provided that the company is given the right to consider superior proposals from other parties.

Founded in 1919, the portfolio of Suncor Energy, Canada’s leading integrated energy company, encompasses a number of operations including oil sands development and upgrading, onshore and offshore oil and gas production, petroleum refining, and product marketing under the Petro-Canada brand.

“We are pleased to have the support of the COS Board of Directors and shareholders, and have been advised of their intent to tender their shares,” said Steve Williams, Suncor’s president and chief executive. “We believe this transaction delivers excellent value to COS shareholders while maintaining Suncor’s commitment to capital discipline, providing both companies’ shareholders with near and long-term value. Together, we’re bringing this full, fair and final offer to COS shareholders and we encourage everyone to tender their shares.”

However, the amended offer is subject to certain conditions, including the acquisition by Suncor of at least 51 percent of the outstanding shares (calculated on a fully-diluted basis) being validly tendered under the amended offer and not withdrawn. Suncor has agreed that if it takes up any shares, that it will pursue a subsequent acquisition transaction to acquire any shares not tendered to the amended offer.

“Since Suncor made its initial offer, our Board has remained steadfast in our commitment to maximise value for all shareholders,” said Don Lowry, chairman of Canadian Oil Sands. “This agreement fulfills that commitment, providing our shareholders with a higher exchange ratio for their shares despite a 37 percent decline in spot oil prices. Given the current market for energy equities, we recommend shareholders tender their shares to Suncor’s improved offer.”

The financial advisers to Suncor for the transaction are JP Morgan and CIBC World Markets. The legal advisers are Blake, Cassels & Graydon LLP and Sullivan & Cromwell LLP. For COS, the financial adviser is RBC Capital Markets and its legal advisers are Osler, Hoskin & Harcourt LLP and Norton Rose Fulbright Canada LLP (adviser to the COS board).

“I am pleased that working in conjunction with the COS Board, together we have been able to improve the terms of the offer for our shares,” said Seymour Schulich, a major COS shareholder. “I will be tendering my shares, and consistent with the COS Board’s recommendation, I encourage my fellow shareholders to do the same.”

Shareholders who do tender by the expiry date, assuming that the amended offer conditions are satisfied on that date, will be entitled to receive Suncor’s first quarter 2016 dividend which is expected to be paid in late March 2016.

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Fraser Tennant

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