A pedestrian is reflected in a Suncor Energy sign in Calgary, in this file photo.Jeff McIntosh/The Canadian Press
Suncor Energy Inc. criticized the poison pill defence adopted by Canadian Oil Sands Ltd. as it seeks shareholder support for a $4.3-billion hostile takeover of the Syncrude partner.
Canadian Oil Sands (COS), the largest owner in the Syncrude Canada Ltd. oil sands project with a 37-per-cent stake, implemented a new shareholder rights plan on Wednesday in a move analysts said was designed to extract a higher bid from Suncor or draw a competing offer from another suitor. The plan calls for 120 days to consider bids, making Suncor's offer ineligible because it expires on Dec. 4.
"We're disappointed but not surprised by COS board's decision to adopt a new board-approved shareholder rights plan in the face of our offer," Steve Williams, Suncor's chief executive officer, said in a statement. "This inappropriate defensive tactic limits the ability of COS shareholders to decide."
Suncor, which owns 12 per cent of Syncrude, launched its hostile bid for Canadian Oil Sands on Monday after attempts to ink a friendly deal were rebuffed earlier this year.
Mr. Williams said on Wednesday that the offer of 0.25 Suncor shares for each Canadian Oil Sands share is a "full and fair" bid that was permitted under a COS rights plan in place earlier this week. Under the deal, Suncor would also assume $2.3-billion in Canadian Oil Sands' net debt.
Canadian Oil Sands has not commented publicly on the offer beyond press releases. One reason could be that its management and board do not want to appear to be making knee-jerk reactions to the unsolicited bid. That would give the company stronger grounds to defend the poison pill should it have to in a court proceeding.
In a statement on Wednesday, the company said the implied value of the current offer is "substantially less" than the friendly bid of $11.84 a share its board rejected in April. "The board will consider Suncor's unsolicited offer in both the current context and in light of the strong long-term potential of Canadian Oil Sands," said Don Lowry, the company's board chairman.
The hostile bid comes as crude prices show tentative signs of firming up, prompting speculation that more consolidation in the sector is on tap.
The collapse in oil prices has forced COS, like others, to slash its payouts to investors and trim its budget in a bid to stay profitable. But the company continues to face operational snags at its sole asset.
Daily production at the Syncrude mine plunged nearly 80 per cent from August to September because of a fire on Aug. 29 that caused an outage in a portion of its upgrading plant. COS said the plant, which converts heavy bitumen into a lighter oil suitable for refining, resumed normal operations last week.
Still, some shareholders have balked at Suncor's offer. "I don't want to sell my stock at a giveaway price," billionaire Seymour Schulich, who controls about 5 per cent of the outstanding shares, said in an interview.
Some analysts said COS was buying time in the hope that some combination of higher oil prices and smoother operations at the struggling Syncrude plant might increase the company's perceived value. U.S. crude on Wednesday tumbled 1.5 per cent to $47.81 (U.S.) a barrel.
"Effectively, they're forcing Suncor to expand the offer time to 120 days," said Michael Dunn, analyst at FirstEnergy Capital Corp. in Calgary. "It gets you a few things: more time to potentially negotiate a competing offer or more time to negotiate a better offer with Suncor, or hope that oil prices go up or recent production at Syncrude gets better."