Filed Under:  Investing Your Money

Canadian Oil Sands Rejects Suncor Bid, Needing More Time

Contributed by on October 8, 2015 at 5:07 pm

“We view this change to the Shareholder Right Plan as being extremely detrimental to Suncor’s unsolicited bid for Canadian Oil Sands”, AltaCorp Capital Research analyst Nicholas Lupick said.

Canadian Oil Sands is the biggest shareholder of the Syncrude joint venture, which also includes Imperial Oil Ltd. and Suncor as investors.

Suncor and Canadian Oil Sands are partners on the massive Syncrude project.

Canadian Oil Sands said it’s reviewing the offer with its advisers and will make a recommendation to shareholders as soon as possible. Scotiabank cut their price target on shares of Canadian Oil Sands from C$11.00 to C$10.00 in a report on Tuesday, September 29th. raised shares of Canadian Oil Sands from an underperform rating to a sector perform rating and increased their price target for the company from C$8.00 to C$9.00 in a research report on Tuesday, August 4th.

“This inappropriate defensive tactic limits the ability of COS shareholders to decide”, Suncor Chief Executive Steve Williams said.

“With a 43 per cent premium to market price and investment in a company that has a strong track record of returning cash to shareholders, we’re confident in the value our offer provides to COS shareholders”.

Suncor is taking advantage of the plunge in crude and stock prices to create new opportunities.

The sale is a part of Canadian Oil Sands’ plan to offload future production assets in a bid to maintain its balance sheet amid plunging oil prices, reports The Wall Street Journal.

Thanks to the Trans-Pacific Partnership (TPP) agreement, Canadian mining companies will see a phase-out of the tariffs they pay to sell their products in TPP countries, which already receive a large quantity of this country’s minerals, the Financial Post reports.

Is the deal good for Suncor? Zacks upgraded Suncor Energy from a hold rating to a buy rating and set a $32.00 price target on the stock in a report on Wednesday, June 24th.

The market reacted negatively to the news, driving Suncor’s shares down more than 2.5%.

The offer is subject to customary closing conditions including tendering of two-thirds of the outstanding COS shares, and regulatory approvals. Suncor was advised by JP Morgan Chase & Co. and Blake, Cassels & Graydon LLP.

Suncor’s unsolicited offer is surprising because hostile bids are uncommon in Canada and it comes before many were expecting mergers and acquisitions to pick up, saidMartin Pelletier, managing director and portfolio manager at TriVest Wealth Counsel Calgary. The company presently has a consensus rating of Buy and a consensus price target of $39.60.

“If oil prices go back to $60 there’s plenty of room for that”, said Pelletier, who bought Canadian Oil Sands shares recently betting on a takeover and is in the money on the stock’s gain. “Canadian Oil Sands is going to look at everything”.