Canadian Oil Sands asks shareholders to reject Suncor’s $3.3 billion hostile bid

Canadian Oil Sands asks shareholders to reject Suncor’s $3.3 billion hostile bid

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

Canadian Oil Sands (TSX:COS) urged shareholders Monday to reject Suncor Energy’s (TSX, NYSE:SU) $3.3 billion (Cdn $4.3bn) hostile takeover, which it qualified as “undervalued, opportunistic and exploitive.”

The Calgary-based company, which holds a 37% stake in Canada’s largest synthetic crude project, Syncrude, accused Suncor of underestimating its business and misusing undisclosed information about a partnership in making a low-ball offer.

Suncor, Canada's largest oil producer, has a 12% interest in Syncrude.

Canadian Oil Sands said the larger rival’s unsolicited bid was “wholly inadequate,” adding it has less value than the current market price.

It further alleged that Suncor was trying to take advantage of temporarily cheap oil prices to buy a valuable asset on the cheap, and get Syncrude's estimated 46 years' worth of production "without paying a fair price."

But Suncor struck back saying its offer reflects "the new business reality," and when proposed, included a price premium of 43% and a dividend increase of 45%.

"We encourage Canadian Oil Sands shareholders to determine for themselves whether our offer is in their best interests," Steve Williams, Suncor's president and chief executive officer, said in a statement.

Suncor, looking to expand in the country’s oil sands amid a prolonged slump in oil prices, renewed efforts this month to take over the biggest shareholder of Syncrude after two friendly approaches were rejected earlier this year.

But Canadian Oil Sands adopted a “poison pill” to thwart Suncor's hostile takeover bid. With such strategy the target company attempts to make its stock less attractive to the potential acquirer.

Only last month, Suncor bought an additional 10% interest in the Fort Hills oil sands project in northern Alberta from French oil company Total.