HOW THE SUNCOR- COS DEAL CAME TOGETHER.

As oil prices continued to free fall last week, oilsands giants Suncor Energy Inc. and Canadian Oil Sands Ltd. were quietly ending an acrimonious hostile battle and working out the details of a $ 6.6- billion merger, announced early Monday.

Top COS shareholders, led by Seymour Schulich, who’d held out for a richer offer, were i nstrumental in finalizing the deal, after squeezing a f ace- saving, modestly higher bid.

They were running out of options.

“It’s the best we could do in that very difficult period, because we basically since October have been fighting a 37 per cent decline in oil prices, which doesn’t help negotiations,” Schulich said in an interview Monday, as oil prices slumped below US$28 a barrel.

It didn’t help, either, that Imperial Oil Ltd. and its parent, Exxon Mobil Corp., a 25 per cent shareholder of the Syncrude Canada plant in which COS is a 37 per cent owner, didn’t step up with a competing bid.

Overtures were made. Even as COS management was scouring the globe for other suitors, COS shareholders were t alking to Exxon Mobil i n Texas to persuade it to increase its ownership of Syncrude, the project it helped create.

Already, Imperial owned 25 per cent and Exxon Mobil ran the Syncrude plant under a management contract. The two companies also own the Kearl and the Cold Lake oilsands projects, making them oilsands giants and COS’s ideal white knight.

But with the election of Rachel Notley’s NDP government in Alberta, then Justin Trudeau’s Liberal government in Ottawa, along with t heir carbon t axes and oilsands growth constraints, the U. S. company was growing increasingly nervous about Canada’s political landscape — nervous enough that it took a pass, giving Suncor a free hand to increase its bet on the oilsands.

Suncor will r ai s e its ownership in Syncrude to 49 per cent from 12 per cent if the deal is finalized Feb. 5.

None of the other two-dozen potential suitors touted by COS in December made an offer, either.

Suncor was also motivated to talk. It had launched the bid early in 2015, but was still short of what it needed to take control of COS’s board, if not of the company.

Schulich s aid Suncor reached out last week, leading to tough negotiations. An agreement was reached and put to paper on the weekend.

Early Monday morning, Suncor and COS announced their respective boards were recommending a merger, and that Suncor had agreed to increase its all-share bid by 12 per cent to 0.28 of a Suncor share for each COS share, up from the initial bid of 0.25 shares. The minimum tender condition was also reduced to at least 51 per cent of the shares, down from 67 per cent.

“Given the current market for energy equities, we recommend shareholders tender their shares to Suncor’s improved offer,” COS chairman Don Lowry said in a statement.

In the same statement, Suncor president and CEO Steve Williams said he was pleased with the support of COS directors and that shareholders, i ncluding Schulich, were planning to tender their shares. Then Williams was off to the World Economic Forum in Davos, Switzerland.

Schulich, who owns five per cent of COS shares and initially fought the takeover, said he was satisfied with the outcome and urged other shareholders to tender their shares.

“The yield on (Suncor) is pretty good, and it sounds a l ot more secure,” said Schulich. “COS would have been, at these prices, in a lot of trouble.

“You can hold out, but there is a question of how long ( the oil crash) is going to take, and none of us knows that, and meanwhile you are just much better off being with a Suncor than with a COS.

“Suncor will wound up being a $ 60 to $ 70 stock, and once you start to look at Suncor and you see what they are doing, and how they are going to raise their production, it becomes very attractive.”

If oil prices stay low for a protracted period, the merger could also mean hardship for Suncor. Reflecting the increased risk, Suncor shares fell $ 1.45 or 4.6 per cent to $ 29.77 on Monday. COS shares rose 79 cents or 10.5 per cent to $8.27.

If oil prices rise, as many analysts now expect, the merger will be another prize for Suncor secured at an attractive price during a downturn. Suncor hopes to reduce oilsands costs by integrating operations with Syncrude. Suncor grew into Canada’s largest oil company after taking over Petro- Canada in March, 2009, during the global financial meltdown.

“I think that Suncor has made a spectacular deal,” said Schulich, 76. “I think their stock is going to do well, I think their production is going to one million barrels in four yeas. We are building a Canadian champion and I am happy it all turned out the way it did.”