UPDATE 4-UTS shareholders cool to sweetened Total bid

Mon Apr 13, 2009 5:44pm EDT

Related Topics

* Total raises bid to C$1.75/shr from C$1.30

* Two major shareholders reject new offer

* UTS shares rise C$0.01 to C$1.81 (Adds company comments; updates UTS share price)

By Scott Haggett

CALGARY, Alberta, April 13 (Reuters) - Total SA (TOTF.PA) boosted its hostile takeover offer for UTS Energy Corp UTS.TO by more than a third to C$1.75 a share on Monday, though its sweetened offer was quickly branded as inadequate by some of the Canadian oil sands developer's biggest shareholders.

Total's new C$829.9 million ($674.7 million) bid is up from the C$1.30 a share offer the French oil major made in late January as it looked to boost its stake in Canada's oil sands, which have the biggest oil reserves outside the Middle East.

The initial bid was rejected by UTS and ignored by its shareholders, who said Total didn't offer enough for the company, whose biggest asset is a 20 percent stake in Petro-Canada's PCA.TO planned Fort Hills oil sands project in northern Alberta.

The new bid is also being panned by some of the Canadian firm's biggest shareholders. West Face Capital, which holds about 12 percent of UTS's shares, and IG Investment Management, which has about 3.8 percent, both say the new offer is inadequate.

"This appears to be a waste of time," said Dom Grestoni, managing partner at IG Investment. "Our opinion is unchanged, we won't be tendering."

Oil prices have climbed by nearly 20 percent since Total made its initial bid, a gain that the shareholders say has not been reflected in the new offer.

"With oil prices up ... since they made their bid (Total) is even further away than they were before," said Greg Boland, chief executive of West Face Capital. "The offer is inadequate."

UTS spurned Total's original offer, arguing the bid was less than its cash on hand and the money its Fort Hills partners must pony up for its share of initial construction costs -- or earn-in -- for the $21 billion project.

Will Roach, UTS's chief executive, said the company's board will offer a formal reply to the sweetened bid later this week. However he said the offer is still worth much less than the company's assets.

"The offer is worth less than what (UTS shares) closed at on Friday," he said. "And the bid remains less than our cash on hand, at C$300 million plus the earn-in of about C$750 million ... plus all our assets, which we think are quite valuable"

Roach said the value of the Fort Hills project has also increased since Total made its bid because of Suncor Energy Inc's (SU.TO) friendly deal to acquire Petro-Canada, announced last month, which will create a dominant oil sands firm.

"We'll have the pre-eminent (oil sands) mining operator at the helm and a lot of synergy opportunities with their existing facilities," he said.

Roach declined to say if the company's search to find an alternative bidder had brought any results. However one analyst said that UTS may be successful in finding a rival willing to pay more.

"They are in the boardroom trying to get a white knight and they could very well get one," said Phil Skolnick, an analyst with Genuity Capital Markets.

Total has a history of making low initial bids for oil sands firms and then sweetening the offers.

The French company was forced to up its bid by about 14 percent when it bought another oil sands player, Synenco Energy Inc, for C$531 million last summer.

It also raised its offer for Deer Creek Energy by 24 percent to C$1.6 billion in 2005, when it made its first takeover of a Canadian oil sands producer.

Shares of UTS Energy again rose above the value of Total's bid, gaining 1 Canadian cent to C$1.81 on the Toronto Stock Exchange.

Total also extended the deadline for its offer to April 27 from April 16.

($1=$1.22 Canadian) (Additional reporting by Ashutosh Joshi; editing by Rob Wilson)

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