Canadian Oil Sands accuses Suncor of paying brokers to win takeover bid

Canadian Oil Sands accuses Suncor of paying brokers to win takeover bid

Syncrude’s $1.9 billion centrifuge plant, currently under construction. (Image courtesy of Syncrude, via Flickr)

Canadian Oil Sands (TSX:COS) is accusing Suncor Energy (TSX, NYSE:SU) of paying brokers to persuade shareholders to support its $3.3 billion (Cdn$4.3bn) hostile takeover bid.

According to a warning note posted in its website, COS says that if an investor holds at least 300 shares, Suncor may be paying that person’s broker a fee of $0.05 per share with a minimum fee of $75.00 and a maximum fee of $1,500.

“That money does not go to COS shareholders, it goes to their brokers,” COS says, adding: "We don’t think that’s right."

Suncor, Canada's dominant oil sands player, launched its hostile takeover for COS in early October after two friendly approaches were spurned last spring.

In response, the target company implemented a shareholder rights plan (otherwise known as a “poison pill”) to buy more time for management to search for a higher bid. Since then, it has repeatedly stated that it considers the offer of 0.25 of a Suncor share per COS share to be “substantially undervalued, obviously opportunistic and exploitive.”

Last week, the company asked Alberta’s regulator to dismantle the anti-takeover measure adopted by COS directors and, on Thursday, it issued a letter to COS shareholders explaining why they should accept the company’s offer.

“The COS Board and management are telling COS shareholders to "do nothing" to protect the value of their investment," Steve Williams, Suncor’s president and chief executive officer said in a statement Thursday. "This would be saying no to the premium value of our offer, and the opportunity for greater upside and lower risk as a Suncor shareholder.

He added that rejecting Suncor’s takeover bid represents real risks to COS shareholders, “given COS' track record of underperformance, financial challenges, and significant vulnerability in a 'lower for longer' oil price market.”

Suncor also announced that it is filing and mailing an update to the circular dated Oct. 5.

The oil giant’s attempt to buy COS, which would increase its ownership stake in Syncrude — Canada’s largest synthetic oil project — from 12% to 49%, expires on December 4, marking 60 days since the offer was made.

Suncor has been looking to expand in the Canada’s oil sands amid a prolonged slump in oil prices. In September, it bought an additional 10% interest in the Fort Hills oil sands project in northern Alberta from French oil company Total.