Santos looks certain to fall to an American private equity company.
That’s after US-based Harbour Energy has returned with an improved $13.5 billion offer for Australia’s third-largest energy producer.
Santos has granted Harbour due diligence after receiving the indicative proposal worth $6.50 per share, it said in a statement to the ASX yesterday.
Harbour Energy is an investment vehicle formed by American private equity firm EIG Global Energy Partners and its offer price (should the due diligence find no problems) of $6.50 a share, is a 28% premium on Santos’ last closing price of $5.07.
Santos shares jumped more than 20% yesterday, closing at $5.89, up 16%. That’s the market telling us there isn’t much chance of a rival bidder emerging.
Investors also see no reason for governments to block the bid – Canberra where FIRB will decide, or South Australia where the bid will provide an early test for the government of Premier Steve Marshall.
Santos had rejected an approach from Harbour at $4.55 a share last November, and in its statement yesterday revealed that Harbour has since returned to the fray with three more offers.
Harbour had bid $6.25 a share on March 22 and $6.37 a share on March 27.
Then $6.50 a share and the Santos board decided at that price, it was now in shareholders’ best interests to engage further with Harbour.
Santos warned that $6.50 a share proposal might still not result in an acceptable offer. The current bid comprises a cash offer price equivalent to $6.13 a share plus a special dividend of 37 cents a share, which is expected to be fully franked.
Harbour Energy chief executive Linda Cook said in a statement her company would look to grow Santos’ gas assets in South Australia’s Cooper Basin, the ConocoPhillips-operated Darwin LNG plant in the Northern Territory and in Papua New Guinea, as well as expansion in Asia and Africa.
"Our focus areas would be in Asia and Africa in particular," Ms Cook told Bloomberg. "We are big believers in the liquefied natural gas story. Our focus for Santos going forward would be in natural gas and LNG in particular." That’s just PR as Santos is in these areas and has had (and has) interests in Indonesia for example.
A successful bid for Santos would give the new owner access to the Browse Basin operations in WA, PNG LNG, Gladstone LNG, and prospective gas basins in the Northern Territory.
Harbour plans to fund the takeover through a combination of debt and equity, with JP Morgan and Morgan Stanley underwriting $US7.75 billion of debt.
