Suncor Energy is making a bid to acquire Canadian Oil Sands Ltd., the largest partner in Syncrude.
The Calgary-based company said it's offering Suncor shares worth about $4.3 billion and would take on about $2.3 billion of debt owed by Canadian Oil Sands, making the total transaction worth $6.6 billion.
Suncor said the offer would give shareholders of Canadian Oil Sands a stake in Canada's largest integrated energy company, which includes the Petro-Canada chain of fuel stations as well as its own oil and gas production and refining operations.
'We're offering a significant premium to COS's current market price.' - Suncor CEO Steve Williams
The offer value is also 43 per cent above the market value for Canadian Oil Sands, based on closing prices at the Toronto Stock Exchange on Friday.
"We believe this is a financially compelling opportunity for COS shareholders," Steve Williams, Suncor's president and chief executive officer, said in a statement.
"We're offering a significant premium to COS's current market price and also providing exposure to a meaningful dividend increase. We're confident in the value this Offer provides to COS shareholders."
Canadian Oil Sands is believed to be vulnerable to a takeover attempt because of a high debt load in the face of low oil prices. Its operating expenses in the second quarter were an estimated $52.63 US a barrel, and it was assuming it would get about $55 a barrel in the third quarter. However, oil prices dropped to the $45 level.
Suncor is in a much stronger position. As an integrated oil company with its own refining and retail operations, it can reap profits from those aspects of its operations when crude prices are low. It also boasts a strong balance sheet.
Suncor said its offer will be open until Dec. 4, although it could be withdrawn or the deadline could be extended. The company scheduled a morning briefing with analysts to discuss the offer, which hasn't been accepted by the COS board.
Canadian Oil Sands is a widely held company, with no shareholder owning more than six per cent of the common shares according to public data compiled by Thomson Reuters. Its largest shareholders are institutional investors.
Canadian Oil Sands has a 37 per cent stake in the Syncrude oilsands operation and Suncor owns 12 per cent. Other Syncrude partners are: Imperial with 25 per cent, Sinopec (nine per cent), Nexen (seven per cent), Murphy Oil and Mocal Energy (five per cent each.)
According to Thomson Reuters data, TD Asset Management is the largest shareholder in Canadian Oil Sands, with about five per cent of COS common stock. Other investors include funds managed by Franklin, Deutsch Asset & Wealth, CIBC, Blackrock and Vanguard.