It's crunch time for Canadian Oil Sands Ltd. shareholders as the deadline for Suncor Energy Inc.'s $4.3-billion takeover nears with no rival bid in sight.
Canadian Oil Sands on Monday once again urged shareholders to reject Suncor's hostile offer after its hunt for a white knight came up empty.
The stock sank nearly 5 per cent to close at $7.90 on the Toronto Stock Exchange. That is more than 10 per cent below the implied value of $8.82 for Suncor's offer, underscoring uncertainty about the deal and pessimism about a rival bid emerging before the all-share offer expires on Jan. 8.
Canadian Oil Sands stock could sink as low as $5 a share should the takeover offer lapse later this week, Suncor chief executive officer Steve Williams said in an interview Monday. However, he said Suncor could also extend the bid, although he would not say what level of support would precipitate such a move. The deal requires two-thirds support from Canadian Oil Sands shareholders.
"I need an indication from Canadian Oil Sands shareholders that they want to go ahead," he said. "Clearly the other guys who have looked at the data room are not particularly interested. Suncor is the only option on the table."
Alberta's securities regulator gave Canadian Oil Sands until Jan. 4 to find a rival bidder under a shareholder rights plan it adopted in October.
Canadian Oil Sands chairman Don Lowry said the company studied several alternatives to Suncor's bid, including a full or partial sale and a royalty financing, but ultimately determined there is more value for shareholders in staying independent.
The company has chopped its dividend and stepped up efforts to conserve cash as profit collapsed. Its shares have plunged more than 60 per cent since mid-2014.
The two partners in the Syncrude Canada Ltd. project have traded blows in a rare show of hostility in Canada's oil patch as global oil prices languish at less than $40 (U.S.) a barrel.
Languishing global oil prices have prompted thousands of layoffs and deep cutbacks at some of the industry's biggest players.
Suncor launched the unsolicited approach last October, seeking to bolster its 12-per-cent stake in the Syncrude venture. Canadian Oil Sands owns 37 per cent of the project.
Suncor is offering 0.25 of one of its shares for each Canadian Oil Sands share, a deal the target's management and board have blasted as undervalued and opportunistic.
Suncor has repeatedly bashed Canadian Oil Sands for patchy results at the Syncrude operation, while insisting it can leverage its financial wherewithal and deep experience running complex mining projects to improve performance at the aging oil sands plant.
Mr. Williams on Monday pointed to a December shutdown of a processing unit at the plant as the latest in a string of unplanned outages. On Monday, Canadian Oil Sands said production at the mining and upgrading venture averaged 238,800 barrels a day (b/d) in the month.
Annual output slumped to 248,300 b/d, well under its capacity of 350,000 barrels, making 2015 "their worst year in the last five years for production," he said.
Canadian Oil Sands insists the project is on the mend, despite years of missteps.
The company says cost savings last year totalled $1.3-billion (Canadian), and it is targeting a further 20-per-cent reduction this year.
Meanwhile, it says it can tap a $1.5-billion credit facility, giving it added financial flexibility to weather a downturn that many analysts say is poised to deepen this year.
Moody's Investors Service Inc. said Monday that deteriorating commodity prices are likely to prompt spending cuts of at least 20 per cent across the industry this year.
Mr. Williams said he is optimistic the deal will go through, although he declined to quantify support. Suncor could pursue "a number" of other opportunities should the offer lapse, he added without providing specifics.
Billionaire investor Seymour Schulich, who said he owns about 5 per cent of Canadian oil Sands, said he has no intention of tendering. He questioned why Suncor is keen to buy a project it has spent months slamming as a shoddy operation. "Why are they so anxious to buy it if it's so bad?"