Suncor Energy makes $4.3B bid for Canadian Oil Sands

Source: Suncor Energy Inc.

Suncor Energy Inc. announced that it has formally commenced an unsolicited offer to Canadian Oil Sands Limited shareholders to acquire all of the outstanding shares of COS for total consideration of approximately $4.3 billion.

Suncor Energy Inc. ("Suncor") today announced that it has formally commenced an unsolicited offer (the "Offer") to Canadian Oil Sands Limited ("COS" TSX Symbol "COS") shareholders to acquire all of the outstanding shares of COS for total consideration of approximately $4.3 billion. Under the terms of the Offer, each COS shareholder will receive consideration of 0.25 of a Suncor share per COS share. Including COS' estimated outstanding net debt of $2.3 billion as at June 30, 2015, the total transaction value is approximately $6.6 billion.

"We believe this is a financially compelling opportunity for COS shareholders," said Steve Williams, Suncor's president and chief executive officer. "By accepting this Offer, COS shareholders will become investors in Canada's leading integrated energy company with 50 years of experience in oil sands operations and a track record of returning significant value to shareholders. We're offering a significant premium to COS' current market price and also providing exposure to a meaningful dividend increase. We're confident in the value this Offer provides to COS shareholders."

Benefits of the Offer:

  • Premium to market price. The Offer represents a significant premium of 43% based on the closing prices of the COS shares and the Suncor shares on the TSX on October 2, 2015, the last trading day before the Offer was announced, and a 35% premium to the volume weighted average trading price of the COS shares on the TSX for the 30 trading days ended October 2, 2015. 

  • Superior returns to shareholders. Suncor's annual dividend has increased for 13 consecutive years, and in the past five years, Suncor has provided its shareholders with a compound annual dividend growth rate in excess of 20%, placing it among the leaders of its peer group. If the Offer is accepted, COS' shareholders would experience a 45% dividend uplift. 

  • Investment in an integrated energy company with significant liquidity and access to capital. Suncor's integrated business model is designed to generate consistent cash flow which has enabled Suncor to fund its capital program, dividend commitments and planned growth projects, even in sustained periods of lower commodity prices. COS shareholders would be positioned to benefit from Suncor's integrated model and ongoing production growth, and continue to participate in any oil price recovery. 

  • Established and experienced management team has delivered strong financial and operational results. Suncor is led by its president and chief executive officer, Steve Williams, and his executive team, who together bring deep oil sands and energy experience. In addition, Suncor's board of directors is composed of highly capable, experienced, diverse and independent directors. Suncor maintains an intense focus on operational excellence, continuous improvement and capital discipline, all of which have delivered strong results for shareholders. As a result, Suncor is well positioned to capture the value potential in COS' assets. 

  • Opportunity to defer taxation. Canadian resident shareholders who hold their shares as capital property will generally be entitled to an automatic rollover to defer Canadian taxation on the disposition of their shares. Such Canadian shareholders may choose to report a capital gain or loss on the exchange of their shares in which case the rollover would not apply to any of their shares. Suncor intends for the Offer to be treated as a reorganization for U.S. federal income tax purposes such that no gain or loss will generally be recognized by U.S. holders on the disposition of their shares.

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