G&M Article: IMO Not Interested In Acquiring COS...?
Canadian Oil poised to reject Suncors takeover bid for Syncrude stake Jeff Lewis The Globe and Mail Canadian Oil Sands Ltd. is likely to reject a $4.3-billion takeover bid from Suncor Energy Inc. in order to extract a higher price or provoke a competing offer, analysts and investment bankers say. Calgary-based Suncor made two friendly offers earlier this year before turning hostile this week in its all-stock offer to acquire Canadian Oil Sands 37-per-cent stake in the Syncrude Canada Ltd. oil sands project. Syncrude is Canadian Oil Sands only asset, and would provide Suncor with additional production at a hefty discount to the cost of developing a new oil project. Suncor currently owns 12 per cent of Syncrude. Shares of Canadian Oil Sands slipped 3 per cent to close at $9.28 Tuesday on the Toronto Stock Exchange. On Monday, the stock surged 55 per cent to close well above the implied value of Suncors offer, suggesting investors thought a rival bid would emerge. Canadian Oil Sands did not respond to a request for comment Tuesday. The company issued a statement on Monday that urged shareholders to sit tight while it reviews the bid. Theyre obviously dragging their feet. Typically what youre trying to do here is either extract more value from the acquirer or find a white knight, said Robert Mark, director of research at Torontos MacDougall MacDougall & MacTier, which does not own Canadian Oil Sands shares. I think this things fully in play. Suncor chief executive officer Steve Williams told Bloomberg on Tuesday he wouldnt be surprised if Canadian Oil Sands rejected the takeover bid. However, he said Suncor was not prepared to raise its offer of 0.25 Suncor shares for each Canadian Oil Sands share. That represents a 43-per-cent premium to Canadian Oil Sands closing stock price as of Oct. 2, but it is less than the implied value of $11.84 a share offered by Suncor in April. That offer was rejected by Canadian Oil Sands board, and some analysts have said the company would likely hold out for a richer bid should oil prices rise. West Texas intermediate crude leaped 4.9 per cent on Tuesday to settle at $48.53 (U.S.) a barrel, amid signs the global supply glut is beginning to wane. A year ago, WTI fetched about $89. Both management and the board at COS [Canadian Oil Sands] had previously rejected offers at a higher exchange ratio, so we believe it is unlikely that COS would accept the 0.25/share offer, Chris Cox, an analyst at Raymond James Ltd., said in a note to clients. We also highlight that there is the possibility that another large owner in the Syncrude partnership could try to offer a competing bid. Mr. Williams on Tuesday said Imperial Oil Ltd. was the other natural bidder for the asset, but several analysts have played down the possibility. Imperial owns 25 per cent of Syncrude. Canadian Oil Sands is a better fit for Suncors portfolio compared with Imperial, Menno Hulshof, an analyst at Toronto-Dominion Bank, told clients in a note. A possible acquisition by Imperial would result in too much exposure to the Syncrude asset, he said, raising its ownership share to roughly 62 per cent. This is all the more an issue given the assets subpar historical reliability, Mr. Hulshof said. Syncrudes other owners include China Petroleum & Chemical Corp. (Sinopec), Mocal Energy Ltd., Murphy Oil Co. Ltd. and CNOOC Ltd.-owned Nexen Energy ULC. In an interview earlier this week, Mr. Williams said Suncor is looking to play a much bigger role in the joint venture to boost reliability and lower Syncrudes operating costs. However, he said that Suncor would not seek to operate the project, which has suffered from a string of operational woes in recent years. The unsolicited play marks Suncors second move in as many weeks to bolster its position in the oil sands despite persistent concerns over export constraints and high development costs. Last month, it paid $310-million (Canadian) to boost its stake in the $15-billion Fort Hills mine under development with Total SA and Teck Resources Ltd.