By Alex Drobin
Alberta-based oil giant Suncor Energy announced a $4.3 billion(CND) bid to acquire Canadian Oil Sands (COS) Ltd. on Monday.
Currently, COS Ltd. has an estimated $2.3 billion(CND) of net debt that Suncor would take on, making the acquisition worth $6.6 billion.
According to a Suncor Energy news release, each COS Ltd. stakeholder will receive 0.25 of a Suncor share.
Suncor and COS are two of seven partners of Syncrude Canada Limited, which is the world’s largest producer of synthetic crude oil.
“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,” said Steve Williams, Suncor President and CEO.
According to the Suncor news release, the company’s annual dividend has increased for 13 consecutive years, and if the bid is accepted, the COS shareholders would see a 45% dividend lift.
“For Suncor, this would be a good purchase,” said Emad al Haque, a licensed trader at TD Waterhouse. “Oil prices are the lowest they’ve been in a long time, and reports say that they can only go back up.”
Williams said that Suncor is offering a premium to the COS market price.
“We’re confident in the value this offer provides to COS shareholders,” said Williams.
Al Haque said the move by Suncor will bring on more bids from other giants in the industry.
“Companies like Imperial Oil and Exxon Mobil are likely to make bids, because they don’t want to lose market share,” said al Haque.
Al Haque also said that there is a good possibility that COS might decline the initial offer, but this should not deter investors from looking into Suncor shares.
“Suncor is still a great company to own long term,” said al Haque. “As oil prices rise, their share prices will rise as well.”