War of words intensifies between Suncor and reluctant takeover target, COS

The board of Canadian Oil Sands Ltd. continues to urge shareholders to reject Suncor Energy Inc’s hostile takeover bid. PHOTO: Canadian Oil Sands

CALGARY—The war of words is intensifying between oilsands giant Suncor Energy and its reluctant takeover target, Canadian Oil Sands.

Suncor issued an open letter to COS shareholders on Thursday – under the heading “hope is not a strategy” – reiterating its view that sticking with the status quo is a risky proposition.

In return, COS deemed the letter a “desperate attempt to scare shareholders.” The leadership of COS has urged its shareholders to do nothing, accusing Suncor of being opportunistic and exploiting inside information it has about an oilsands project they jointly own.

Both companies are partners in the Syncrude oilsands development north of Fort McMurray, Alta. – COS the largest owner with 37 per cent and Suncor with 12 per cent.

Suncor said COS has “consistently over-promised and under-delivered” when it comes to performance at Syncrude, which has faced a litany of production issues over the years.

Suncor has shown no signs that it’s willing to sweeten its all-stock bid, noting the offer is worth more now than when it was first announced on Oct. 5 because its share price has risen.

It now says the offer is worth $4.7 billion – around $400 million more than when it first launched its hostile bid. The offer would also see Suncor taking on $2.2 billion in debt COS had as of Sept. 30, bringing the deal’s total price tag to $6.9 billion.

“We don’t think hope is an appropriate strategy for Canadian Oil Sands,” Suncor CEO Steve Williams wrote in the missive.

“Why? While no one has a crystal ball when it comes to oil prices, the current market outlook doesn’t see oil prices getting back to US$60 per barrel until at least 2020.”

He also accused COS leadership of “misleading spin” about challenges the company faces.

In a release Thursday afternoon, COS fired back.

“Fearmongering will not breathe life into a dead offer,” said COS CEO Ryan Kubik.

Earlier, in a notice on its website, COS warned Suncor is paying brokers to get shareholders to tender their stock to the bid.

“We don’t think that’s right. We think our shareholders should decide for themselves, free from the influence of brokers being financially compensated to do Suncor’s work for them,” the company said

Suncor spokeswoman Sneh Seetal said the practice, which is relatively common, is meant to ensure retail shareholders are informed about the offer, and that brokers are compensated for the time it takes to reach out to them.

Suncor will also be challenging a new shareholder rights plan that COS put in place to buy time to fend off the hostile bid. The Alberta Securities Commission is to hear the case later this month.

“If Suncor had confidence in the merits of its bid, it wouldn’t be trying to ram it through by challenging our shareholder rights plan. It would not need to try to steal time for a decision from our shareholders. Suncor is clearly not listening when our shareholders tell them the same thing they are saying to us – this bid won’t fly,” said Kubik.

“Shareholders don’t need to do anything to reject this unwelcome and underwhelming bid. In fact, save yourself the time and hang up when Suncor or one of its paid brokers call.”