CALGARY -- Suncor Energy has made a new appeal to the shareholders of its reluctant takeover target, arguing that Canadian Oil Sands' top brass would own more stock in their company if they were truly confident in its future as an independent player.
"COS board members and management have almost no skin in the game, yet they want you to take a huge risk by rejecting our offer," Suncor CEO Steve Williams wrote in an open letter released Tuesday.
"Despite their overheated rhetoric and claims that COS would be a strong independent company, all COS Board members combined (including CEO Ryan Kubik) own less than 0.1 per cent of the company's shares. If they believed their own rhetoric, wouldn't they own more than that?"
The all-stock bid is worth about $4.2 billion based on Suncor's most recent closing stock price and expires on Jan. 8.
Suncor (TSX:SU) took its offer directly to COS shareholders on Oct. 5 after attempts at inking a friendly deal -- at a higher price -- were rebuffed in the spring.
COS (TSX:COS) has dismissed the offer as too low, opportunistic and exploitive. It contends the company is in strong enough shape to weather the deep downturn in crude prices and is poised to thrive once the market recovers.
Both companies are partners in the massive Syncrude oilsands mine north of Fort McMurray, Alta. -- Suncor with 12 per cent and COS with 37 per cent.
Suncor is one of Canada's biggest energy companies, with vast holdings in the oilsands and thousands of employees. COS, on the other hand, has a staff of about 30 and relies on its Syncrude stake as its sole asset.
U.S. benchmark oil prices have slid below US$40 a barrel in recent weeks -- compared with mid-2014 highs of nearly $108 -- and most analysts say it'll be another tough year in 2016.
Williams said COS "simply can't deliver" in that type of environment.
"Based on the current outlook for oil prices, we expect COS will be bleeding cash again next year, even if it could achieve its most optimistic forecasts."
COS has said 25 parties other than Suncor have shown some degree of interest in a deal, but Williams said there is "no evidence" a better offer will emerge. Nor does Williams see any evidence that operations will improve at Syncrude, following earlier than scheduled downtime at the plant this month.
COS CEO Kubik said Suncor is "panicking" because shareholders aren't interested in its offer.
"The facts are it is substantially undervalued and opportunistic and is well below what Suncor has demonstrated it is willing to pay for inferior assets with less value," he said in a statement.
Suncor's offer doesn't factor in the "significant value" of the Syncrude upgrader, which converts thick oilsands bitumen into more valuable light crude that refineries can handle, the mine's 46-year reserves and COS' 98 per cent correlation to the price of oil, said Kubik.
"Shareholders are telling us they see greater value in independence," he said. "No amount of fear mongering will change that."
