A sign directing traffic to the Suncor Energy Inc. base plant stands at the Athabasca Oil Sands near Fort McMurray, Alberta, Canada, on Tuesday, March 26, 2013. Photographer: Brett Gundlock/BloombergBrett Gundlock/Bloomberg
Suncor Energy Inc. wants to buy a controlling interest in Canadian Oil Sands Ltd. COS's management doesn't want the company to be bought; in the jargon of the corporate world, that makes this a "hostile takeover bid."
On Oct. 7, two days after Suncor expressed its desire for the company, the board of directors of COS issued new securities to obstruct the bid, preventing the shareholders from readily selling their shares for a market price. That's called a "poison pill" or, euphemistically, "defensive tactics."
With a little bit of luck, this may be Canada's last poison pill. In March, the Canadian Securities Regulators proposed a new regime in which the target company's management would have 120 days in which to find alternative bidders, rather than engaging in panicky conflict or prolonged litigation. That would also give the target's shareholders time to weigh their interests.
This welcome initative was a sensible response to a wild election promise made by Jean Charest, then the premier of Quebec, to enable the managements of corporations to reject takeover bids outright – without having to deign to consult mere shareholders: the actual owners. That campaign plank, verging on nationalist demagoguery, spurred the Canadian Securities Regulators to rethink how to deal with takeover-bid struggles.
The courts of the United States – actually, the courts of Delaware, ground zero for U.S. corporate law – long ago developed their own jurisprudence to deal with these disputes promptly and clearly.
The CSR's proposed amendments could come into effect in the first half of 2016. In the meantime, the Alberta Securities Commission will have to deal with the Suncor and COS dispute under the existing rules.
The Canadian Oil Sands board is right when it says that Suncor's bid is "opportunistic." COS's assets are at a low value, as are oil prices. That, however, is the nature of markets. Opportunism is the seeking of opportunities. Buying when others are selling is not "exploitive" – another word in COS's stock of rhetoric.
Even so, it's only fair to always give shareholders time to catch their breath, assess their positions and hope for better days – and no more poison pills.