Total Offers UTS Energy Its 'Best and Final' Price

UTS Energy Corp. (UEYCF.PK) is trading below the price Total SA (TOT) has offered shareholders in its hostile takeover bid after the head of French company’s Canadian operations on Wednesday said its C$1.75 per share was its “best and final offer.”

UTS, whose crown jewel is its 20% stake in the undeveloped Fort Hills oil sands mining project, is trading at C$1.68, down C$.13 or 7%, Thursday afternoon. It closed at C$1.81 on Wednesday.

Michael Borrell, president of Total E&P Canada Ltd., said the sweetened C$1.75 offer is its “best and final” bid in an interview with the Financial Post after markets closed Wednesday. Earlier in the day, he went on television while the market was open and said Total’s offer was “final” but did not use the word “best.” Investors consider “best and final” stronger language, in part thanks to tradition, and potential (but not inevitable) legal repercussions.

Reputation is also at stake, investors argue. However, there have been instances where executives have said their offers were “best and final” only to come back at shareholders with a better deal. Executives often use vague language such as “full and fair,” rather than the more definitive “best and final.”

Total’s initial January offer of C$1.30 was sharply rejected by major vocal shareholders. The stock traded above Total’s original offer, and then traded above the C$1.75 bid, although not to the same degree. Mr. Borrell on Wednesday argued Total’s offer was supporting the richer levels.

UTS has fiercely argued Total’s bid is a low-ball offer. It argues its cash in the bank, earn-in owed to it by its Fort Hills partners (Petro-Canada (PCZ) and Teck Cominco Ltd. (TCK)) and recovering oil prices makes it worth more. Further, the proposed merger between Suncor Energy Inc. (SU) and Petro-Canada also strengthens Fort Hills’ potential, UTS says.

Mr. Borrell, on the other hand, counters that the value of the C$750-million earn-in will not be worth the same in future years as it is now, and that the project is subject to timing risk.