Suncor Would Be Wise To Extend The Offer IMO......
The ASC announcement and COSs 2016 Capital Budget announcement changed little in terms of the markets outlook on COS: last I checked, COS was at $8.85 and SU was $37.62.........$8.85 x 4 = $35.40, so COS is still trading at significantly less than 0.25 SU..........The ball is now in Suncors court as they must decide by the end of the week whether to extend their 0.25 SU share offer to January 4..........I think Suncor would be smart to do so...........If Suncor walks away, the pressure would be off COS management to find another buyer as there would no longer be an offer in place, and any future offer would start the clock from the beginning again, this time with the new 120-day window in place.............Conversely, if Suncor extends the offer to January 4, the pressure on COS management continues as they will have to either come through with an offer that is significantly better than SUs offer, or let the shareholders vote on the SU offer after spending COS shareholder money and coming up empty re. another (superior) offer.........It seems people forget the fact that COS not only has to find a buyer who is interested in purchasing COS, but that buyer has to produce an offer than is significantly better than SUs offer.......in this oil price environment, that will be hard to do in my opinion............I think COS management created a self-inflicted mess and they set themselves up to look really bad. COS could have simply made their case to their shareholders as to why the SU deal was inadequate, let the vote occur within 60 days, and if they were convincing enough in their reasons for recommending the rejection, the offer would be voted down. They could then change to the 120-day rule and be under no pressure to find another buyer...............Instead, they have hired Royal Bank to find another buyer, thus putting themselves in a position of actually needing to find another buyer willing to offer significantly more than SU is offering. Otherwise, COS shareholders and the market in general will likely assume that the SU offer is a good one since COS management tried and failed to find any party willing to pay more.............