After months of negotiation, Suncor Energy Inc. SU − Canada’s largest energy firm − has finally decided to raise its takeover bid for Canadian Oil Sands Ltd.
The two companies finally signed a friendly accord under which Suncor has consented to take its bid to C$4.24 billion from the prior offer of C$3.78 billion. Suncor’s new offer of 0.28 share for every share of Canadian Oil Sand has been increased from the previous ratio of 0.25. Investors should know that including C$2.4 billion in debt, the recent deal is valued at C$6.6 billion.
Most importantly, the board of directors of both Suncor Energy and Canadian Oil Sands is in favor of the revised agreement. However, the deal − likely to expire by Feb 5, 2016 − is still dependent on 51% of Canadian Oil Sands’ shareholders’ approval – lower than the previous threshold of almost 66.7%.
Let’s go to Suncor Energy’s motivation behind acquiring Canadian Oil Sands. It is common knowledge that Canadian Oil Sands possesses the largest stake of 36.7% in the Syncrude oil-sands mining consortium. Now, Suncor Energy with a 12% ownership in the consortium is trying to snatch this position from Canadian Oil Sands and for that, acquiring the latter is the easiest way out. The world’s largest publicly traded oil company, Exxon Mobil Corporation XOM has a 25% stake in the consortium.
Calgary, Alberta-based Suncor is Canada’s premier integrated energy company. Suncor's operations include oil sands development and upgrading, conventional and offshore crude oil and gas production, petroleum refining, and product marketing under the Petro-Canada brand.
However, the company’s earnings and cash flows are being adversely affected by the ongoing oil price slump. As a result, Suncor currently carries a Zacks Rank #5 (Sell), implying that it will significantly underperform the broader U.S. equity market over the next one to three months.
Meanwhile, some better-ranked players in the energy sector are Murphy USA Inc. MUSA and Boardwalk Pipeline Partners, LP BWP. Both stocks sport a Zacks Rank #1 (Strong Buy).
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Click to get this free report BOARDWALK PIPLN (BWP): Free Stock Analysis Report MURPHY USA INC (MUSA): Free Stock Analysis Report SUNCOR ENERGY (SU): Free Stock Analysis Report EXXON MOBIL CRP (XOM): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research