Canadian Manufacturing

Suncor and Canadian Oil Sands Ltd. agree to $6.6B deal

The contentious deal spent months in hard negotiations, with Suncor extending the deadline multiple times

Photo credit: Suncor Energy

Photo credit: Suncor Energy

CALGARY—The boards of Suncor Energy Inc. and Canadian Oil Sands Ltd. (COS) have reached an agreement to support the offer by Suncor to purchase all of the shares of COS.

Suncor increased its offer to 0.28 of a Suncor share for each COS share. The amended offer, with a total aggregate transaction value of approximately $6.6 billion including COS’ estimated debt of $2.4 billion, has the support of the boards of directors of both companies.

The COS board has determined that the new offer is in the best interests of COS and recommends that shareholders “tender to the amended offer.”

“We are pleased to have the support of the COS Board of Directors and shareholders, including Seymour Schulich, and have been advised of their intent to tender their shares” said Steve Williams, Suncor’s president and chief executive officer. “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.”

“Since Suncor made its initial offer, our Board has remained steadfast in our commitment to maximize value for all shareholders. 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,” said Don Lowry, Chairman of Canadian Oil Sands. “Our shareholders clearly signaled they expected more for their COS shares, and the Board has worked to secure that under very challenging circumstances. Given the current market for energy equities, we recommend shareholders tender their shares to Suncor’s improved offer.”

“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. I will be tendering my shares, and consistent with the COS Board’s recommendation, I encourage my fellow shareholders to tender their shares” said Seymour Schulich, a major holder of COS shares.

A notice of variation and extension is expected to be mailed to registered security holders of COS by the end of this week and will be filed on COS’ SEDAR profile. The offer will include an extension of the expiry time which is currently anticipated to be extended to 4:00 p.m. (MT) on Feb. 5, 2016.

The deal is subject to certain conditions, including the acquisition by Suncor of at least 51 per cent of the outstanding shares (calculated on a fully-diluted basis) being validly tendered and not withdrawn. This minimum tender condition has been lowered from 66 2/3 per cent. Suncor has agreed that if it takes up any Shares, that it will pursue a subsequent acquisition transaction to acquire any shares not tendered.

As a result of lowering the minimum tender condition to 51 per cent, there have been changes to the expected U.S. federal income tax consequences to accepting the offer and Suncor now expects that the receipt of Suncor common shares in exchange for COS common shares will be a taxable transaction for U.S. federal income tax purposes. The offer will continue to allow a tax-deferred rollover for Canadian shareholders of COS.

The Agreement contains, among other things, provisions for the suspension of dividends in the first quarter of 2016 by COS, for non-solicitation of competing offers, provided that COS has the right to consider superior proposals from other parties, subject to a right on the part of Suncor to match any such proposal and for a $130 million break fee payable by COS to Suncor in certain circumstances if the offer is not completed.

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