Suncor Energy (TSE:SU), Canada's largest oil sands producer, said on Thursday it is sending a letter to shareholders of Canadian Oil Sands Limited (TSE:COS).
The letter explains why Canadian Oil Sands shareholders should disregard a recommendation from the board of Canadian Oil Sands opposing Suncor's $4.7bn hostile offer to buy all of the shares of Canadian Oil Sands, the largest member of the Syncrude Canada oil sands consortium.
The total transaction value is approximately $6.9bn, including Canadian Oil Sands' estimated outstanding net debt of $2.2bn as at September 30.
Suncor said in a statement on Thursday that it believes that Canadian Oil Sands shareholders should accept the offer, given Canadian Oil Sands' track record of underperformance, financial challenges, and significant vulnerability in a 'lower for longer' oil price market.
"The COS Board and management are telling COS shareholders to "do nothing" to protect the value of their investment," Suncor Chief Executive Officer Steve Williams was quoted in the statement as saying.
"This would be saying no to the premium value of our Offer, and the opportunity for greater upside and lower risk as a Suncor shareholder," he added.
"Rejecting our Offer represents real risk to COS shareholders, and we urge them to consider the facts and accept our offer," Williams warned.
Since the offer was announced, the potential premium has increased to 57% from 43% compared with the pre-offer TSX trading price of $6.19 for Canadian Oil Sands.
The higher premium is a result of the substantial increase in the price of Suncor's shares, which closed at $38.97 on the TSX on November 9, up from a pre-offer closing price of $35.37 on October 2.
Suncor is continuing to offer to acquire all of the outstanding shares of Canadian Oil Sands for a consideration of 0.25 of a Suncor share per Canadian Oil Sands share.
Shares of Suncor fell 1.8% to C$37.49 at 9:47 a.m. in Toronto, while shares of Canadian Oil Sands dropped 2% to C$9.35.