As per the offer terms, shareholders of Canadian Oil Sands will receive 0.25 of a Suncor share for each share held.
The total transaction value is expected to be approximately $6.6bn ($5bn), as Suncor Energy has offered to assume $2.3bn of Canadian Oil Sands’ estimated outstanding net debt as of 30 June 2015.
Suncor president and CEO Steve Williams said: "We believe this is a financially compelling opportunity for COS shareholders.
"We’re offering a significant premium to COS’ current market price and also providing exposure to a meaningful dividend increase. We’re confident in the value this Offer provides to COS shareholders."
Suncor said that the shareholders of COS would get a 45% dividend increase, if they accept the offer.
The deal would also increase Suncor’s stake from 12% to 48.74% in the 326,000 barrel per day Syncrude mining and upgrading project in the Athabasca oil sands region near Fort McMurray, Alberta.
Canadian Oil Sands owns 36.74% interest in the Syncrude project, which is claimed to be the largest producer of light, sweet synthetic oil from Canada’s oil sands.
Syncrude project is owned by seven oil producers including Imperial Oil Resources with 25% stake; Nexen Oil Sands Partnership 7.23%; Sinopec Oil Sands Partnership and Sinopec Oil Sands Partnership each with 9.03%; as well as Mocal Energy and Murphy Oil Company each holding 5%.
The sale is a part of Canadian Oil Sands’ plan to offload future production assets in a bid to maintain its balance sheet amid plunging oil prices, reports The Wall Street Journal.
In response to the offer, Canadian Oil Sands said it would review the Suncor offer and related take-over bid circular and requested its shareholders not to decide on the offer until the board completion of review to make a recommendation as to its merits.
Canada is estimated to hold world’s third largest crude reserves after Saudi Arabia and Venezuela, reports Reuter.
Image: Suncor delivers about 500,000 tons of oil sand per day to the ore preparation plants. Photo: Copyright Suncor Energy Inc. 2015.
