OTTAWA -(Dow Jones)- Canada's UTS Energy Corp. (UTS.T) has rejected Total SA's (TOT) C$617 million takeover bid, calling it an "inadequate and opportunistic" offer following the plunge in crude prices.
The would-be oil sands developer's board of directors unanimously rejected the C$1.30-a-share bid, which angered many key shareholders for not ascribing any value to UTS' assets.
"This is an inadequate and opportunistic offer that fails to recognize the full value of UTS," Dennis Sharp, chairman of UTS' board of directors, said in a statement Monday. "We can do better for our shareholders than what this offer represents."
UTS has created a special board committee to pursue various initiatives to maximize shareholder value.
Total couldn't be reached for comment.
UTS' main asset is a 20% stake in Petro-Canada's (PCZ) Fort Hills development, part of which has been put on hold after costs rocketed north of C$28 billion. The Calgary-based company also has plans for two other projects, dubbed Frontier and Equinox, jointly owned with struggling mining firm Teck Cominco Ltd. (TCK), the third Fort Hills partner.
"The sum of UTS' cash, net effective investment to date in all of its projects ... is C$3.57 per common share which significantly exceeds the value of the Total offer before attributing any value to UTS' other resources and lands," UTS said in a statement.
Total's bid, made nearly two weeks ago, marks the first takeover attempt since plunging crude prices crunched down on Alberta's high-cost oil sands, which have seen a succession of project delays and cancellations. Crude's freefall from July's all-time highs near $150 a barrel and the meltdown in financial markets has wiped billions off oil sands companies' market valuations, and small non-producing firms like UTS have been the hardest hit.
UTS shares had shed more than 85% off last summer's highs above C$6 on the Toronto Stock Exchange but shot up in the wake of Total's offer. Shares were trading recently at C$1.75, up 2.9%.
The French oil major already holds extensive leases near the Fort Hills site and has made little secret of its enthusiasm for the oil sands. Total is already looking at "the possibility of acquiring an additional interest" in Fort Hills, likely eyeing Teck's 20% interest and possibly a slice of Petro-Canada's stake as well.
Total's previous oil sands acquisitions have also run into initial resistance. Last summer, Total was forced to extend its initial offer for Synenco Energy Inc. three times before raising the offer price 14%, and it boosted its offer by nearly a quarter for 2005's takeover of Deer Creek Energy Ltd.
"The supermajor has a well-known reputation for swooping in with low offers, catching management off-guard, before then upgrading the initial proposal slightly," Lawrence Poole, a London-based analyst for IHS Global Insight, said in a recent note. "It is almost certain that Total will use the price ranges discussed as a basis for negotiation with UTS management and shareholders."
-By Hyun Young Lee, Dow Jones Newswires; 613-237-0669; hyunyoung.lee@dowjones.com