Suncor agrees to buy Canadian Oil Sands after raising bid by 12%

Suncor Energy agreed to buy Canadian Oil Sands after raising its offer by 12% to C$4.2bn ($2.9bn), winning approval from a management team that had rejected earlier approaches.
Suncor, the country’s largest oil producer, raised it’s offer to 0.28 of its shares for every Canadian Oil Sands stock, according to a statement yesterday. That’s a 17% premium to Canadian Oil Sand’s closing share price on Friday. The deal has the support of both companies’ boards, according to the statement.
Suncor wants the deal, subject to shareholder and regulatory approval, because it would increase the company’s stake in the Syncrude Canada oil-sands mine and upgrader to 49% from 12%, making it the largest shareholder. The company is working to lower operating costs at its projects as the industry faces the lowest crude prices in more than a decade.
 “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,” Steve Williams, Suncor’s president and chief executive officer, said in the statement.
Suncor’s attempt to take over its Syncrude partner turned hostile in October after Williams approached Canadian Oil Sands’ CEO Ryan Kubik earlier in 2015 with two different offers. A war of words followed, with Kubik arguing that his company was better off independent, while Williams countered that his forecast for the price of oil staying “lower for longer” meant shareholders would be better served owning Suncor shares. The companies resumed talks in the past few days, people with knowledge of the discussions said on Sunday.
The new terms require approval of at least 51% of Canadian Oil Sands shares to be tendered by shareholders, according to the statement. Previously the requirement was a minimum of two-thirds. Between 40% and 50% of shareholders opted to accept the earlier offer, according to people familiar with the matter, who asked not to be named because the matter is private.
Oil’s crash has weighed on shareholders since the hostile bid was first announced on October 5 and West Texas Intermediate was trading around $45 a barrel. The US benchmark has since tumbled more than 35% and sank below $30 for the first time in 12 years on January 12. Prices yesterday fell as much as 3.6% to $28.36 on the New York Mercantile Exchange.
The new offer allows Canadian Oil Sands to suspend dividend payouts in the first quarter of 2016. It also allows Suncor to match any other offer Canadian Oil Sands may receive. The agreement also has a $130mn break fee.