Canada's Suncor Energy Inc. (NYSE: SU) has reached a deal to acquire rival Canadian Oil Sands Ltd. on Jan. 18 by raising its all-stock offer, a move seen marking the end of a months-long battle for the synthetic crude asset.
The deal, valued at about C$4.24 billion (US$2.93 billion), came days after Suncor's hostile bid fell short of support from Canadian Oil Sands shareholders.
Canadian Oil Sands' shares rose about 11%, while Suncor fell 4.7%.
Oil sands producers have been struggling with tumbling global crude oil prices, which have slid to their lowest levels since 2003 over worries of a global supply glut.
Suncor will now offer Canadian Oil Sands shareholders 0.28 of a Suncor share for each share held, up from the initial bid of 0.25 shares. The new offer values Canadian Oil Sands at C$8.74 per share, a premium of nearly 17% over the closing price of both stocks on Jan. 15.
In response to the hostile bid, Canadian Oil Sands had adopted a shareholder rights plan that acted as a poison pill, and urged investors to reject the offer.
Seymour Schulich, a major Canadian Oil Sands investor who had opposed the initial bid, said he was satisfied with the outcome.
"It's the best we could do in the environment we're in. I wish we had a better environment, but we didn't," he said in an interview. The owner of 5% of Canadian Oil Sands shares, Schulich was involved with the deal negotiations.
"They're going to get an overwhelming majority of the shares now," he said.
Including Canadian Oil Sands' C$2.4 billion debt, the deal is valued at about C$6.6 billion.
With the takeover, Suncor's 12-percent stake in Syncrude—the oil-sands mining consortium in northern Alberta in which Canadian Oil Sands has a 36.7% stake—would rise to 49%.
"It makes sense from the standpoint that Suncor has a lot of value to add to Syncrude," said Scott Vali, portfolio manager and vice-president, equities at CIBC Asset Management, one of the biggest shareholders in COS.
"It's a fair price for all parties involved," he said.
JP Morgan and CIBC World Markets are financial advisers to Suncor, while Blake, Cassels & Graydon LLP and Sullivan & Cromwell LLP are its legal advisers.
RBC Capital Markets, Osler, Hoskin & Harcourt LLP and Norton Rose Fulbright Canada LLP are advising Canadian Oil Sands.
D. F. King provided Suncor with proxy solicitation advice, and Kingsdale advised Canadian Oil Sands.
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