Unless something dramatic happens between now and Friday, Suncor’s planned, albeit hostile, acquisition of Canadian Oil Sands is expected to play out as anticipated.
While shareholders may not like the all-paper offer, they will support the transaction because the alternative of owning an independent company that trades lower – is not acceptable.
In other words despite the best efforts of the target, the just say no defence that’s part of the dynamics of U.S. takeover scene doesn’t cut it in Canada. At some stage in the process, the shareholders have the final say, a choice made easier because no alternatives have been presented by Canadian Oil Sands (COS.)
Canadian Oil Sands issues ‘Declaration of Independence’ as Suncor offer nears deadlineSuncor Energy Inc’s bid for Canadian Oil Sands Ltd pits CEO’s pledge to deliver against poor record
In order to win, Suncor needs the support of two-thirds of COS shareholders who tender. It’s possible that Suncor may not get the two-thirds support because the highly motivated no campaign will vote against the deal while other shareholders will, for whatever reason, not get around to casting their vote. “The offer is too low, plain and simple,” said Seymour Schulich, a shareholder opposed to the deal.
All of which begs the question: What happened to the interest in COS received from 25 potential buyers and four “highly credible parties?’
At a hearing before the Alberta Securities Commission in late November, it was said as many as 25 parties are reviewing the “opportunity,” while four had signed confidentiality agreements “presumably giving access to data-room or other pertinent information.”
Of the four, two had received presentations by COS management. The hearing was told that with more time there is a “good prospect for one or more counterparties to make a proposal.”
At the end of the hearing, called on the implementation of a new shareholders rights plan at COS — a plan that hadn’t been put to the COS shareholders — the ASC ruled the Suncor offer could be open for 90 days, or one month less than the 120 days sought by COS.
During the hearing, advisers for the two sides disagreed on who could be interested. COS said parties were participating in the process even though Suncor indicated that those parties were likely to have no interest in COS. There was another list of interested parties, namely strategic and financial entities that had the capability to consummate a transaction but not identified by Suncor.
In the ASC ruling the panel said it “accepted Suncor’s position that there was a rather modest universe of third parties who might realistically be expected to have capacity and interest sufficient to generate an alternative to the Suncor bid in any reasonable time.”
As part of its decision to extend Suncor’s offer by another 30 days, the ASC said it concluded “from the evidence indicated that there were some – a few not many – participants actively engaged in the process and that this was consistent with the process operating as it should in a context where a large number of participants was unlikely.”
The ASC agreed with Suncor’s suggestion COS could have done more to kick-start the process once Suncor made approaches to COS in early 2015. And COS could have set up the data room in a more timely and complete manner once Suncor went hostile.
This week COS offered what some have interpreted as a mea culpa: a pay cut for directors.