By January 18, 2016 Read More →

Suncor Energy and Canadian Oil Sands reach agreement to support acquisition

Exchanging Suncor common shares for COS common shares will be taxable transaction for US federal income tax

Steve Williams, Suncor president and chief executive officer.

Steve Williams, Suncor president and chief executive officer.

CALGARY, Alta – After a very public hostile takeover, Suncor Energy Inc. announced Monday that it has reached an agreement to buy all of the shares of Canadian Oil Sands Limited.

Under the terms of the support agreement Suncor has agreed to amend its offer to provide for an increase in the original offer to COS shareholders to 0.28 of a Suncor share for each COS share. The amended offer, with a total aggregate transaction value of approximately $6.6 billion including COS’ estimated debt of $2.4 billion, has the support of the boards of directors of both companies.

“We are pleased to have the support of the COS board of directors and shareholders, including Seymour Schulich, and have been advised of their intent to tender their shares” said Steve Williams, Suncor’s president and CEO.

The Canadian Oil Sands says its board has received an opinion from its financial advisor, RBC Capital Markets, that, as of Jan. 17 the consideration under the amended offer is fair, from a financial point of view, to its shareholders. The Canadian Oil Sands board has determined that the amended offer is in the best interests of has recommended that shareholders tender to the amended offer.

“We believe this transaction delivers excellent value to COS shareholders while maintaining Suncor’s commitment to capital discipline, providing both companies’ shareholders with near and long-term value. Together, we’re bringing this full, fair and final offer to COS shareholders and we encourage everyone to tender their shares,” said Williams.


Don Lowry, Chairman of Canadian Oil Sands

Don Lowry, chairman of Canadian Oil Sands, says the new agreement provides shareholders with a higher exchange ratio for their shares despite a 37 per cent decline in spot oil prices.

“Our shareholders clearly signaled they expected more for their COS shares, and the Board has worked to secure that under very challenging circumstances,” said Lowry.

“Given the current market for energy equities, we recommend shareholders tender their shares to Suncor’s improved offer.”

A notice of variation and extension for the Amended Offer is expected to be mailed to registered security holders of COS by the end of this week and will be filed on COS’ SEDAR profile.

“I am pleased that working in conjunction with the COS Board, together we have been able to improve the terms of the offer for our shares. I will be tendering my shares, and consistent with the COS board’s recommendation, I encourage my fellow shareholders to tender their shares” said Seymour Schulich, a major holder of COS shares and outspoken opponent of the original Suncor offer.

SuncorThe amended offer is subject to certain conditions, including the acquisition by Suncor of at least 51% of the outstanding shares (calculated on a fully-diluted basis) being validly tendered under the Amended Offer and not withdrawn.

This minimum tender condition has been lowered from 66 2/3 per cent. Suncor has agreed that if it takes up any shares, that it will pursue a subsequent acquisition transaction to acquire any shares not tendered to the amended offer.

As a result of lowering the minimum tender condition to 51 per cent, there have been changes to the expected U.S. federal income tax consequences to accepting the offer and Suncor now expects that the receipt of Suncor common shares in exchange for COS common shares pursuant to the amended offer will be a taxable transaction for U.S. federal income tax purposes.

COS shareholders are urged to carefully review the amended U.S. federal income tax disclosure to be provided in the notice of variation and extension. The amended offer will continue to allow a tax-deferred rollover for Canadian shareholders of COS.

Shareholders who tender by the expiry date, assuming the amended offer conditions are satisfied on that date, will be entitled to receive Suncor’s first quarter 2016 dividend anticipated to be paid in late March, 2016.

Posted in: Energy Financial

Comments are closed.