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Waterous Energy Fund, run by Calgary financier Adam Waterous, seen here on Dec. 15, 2008, launched an offer to buy 52.5 million Osum shares at $2.40 each early this month.

Deborah Baic/The Globe and Mail

Osum Oil Sands Corp. is urging its shareholders to reject a $126-million hostile bid for a majority stake in the company by Waterous Energy Fund, saying it aims to take advantage of a weak market during the pandemic.

Waterous Energy Fund (WEF), run by Calgary financier Adam Waterous, launched an offer to buy 52.5 million Osum shares at $2.40 each early this month. The bid follows WEF’s acquisition of a 45-per-cent stake in the summer at the same price. If the latest bid is successful, the Waterous interest would increase to as much as 85 per cent.

However, Osum, a privately held company, is worth more than what is being offered, the company said on Thursday, after a review by a special committee of the board. It recommended shareholders reject the bid, saying it is being launched by an insider and includes no premium for the control WEF would gain.

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“The company has successfully tripled production capacity, continuously driven down operating costs and significantly reduced debt,” Osum chairman William Friley said in a statement. “With the lowest net debt to cash flow ratio among publicly traded oil sands and oil-weighted peers and a clear path to zero net debt in the near term, there is no pressure to sell.”

When it announced the bid, Waterous said it already had the support of four institutional investors that collectively own 20 per cent of the outstanding shares, and expected one more to back it.

However, Osum pointed out there has been no corporate sale process, which eliminates any opportunity for another bidder to come forward with an offer at a higher price.

Mr. Waterous was not immediately available for comment.

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