San­tos sniffs at Har­bour bid

The West Australian - - WEST BUSINESS - John Dagge

The San­tos board is likely to hold out for a sweeter of­fer from its US suitor which has de­clined to in­crease its $13.7 bil­lion bid de­spite a rally in oil prices, an­a­lysts say.

Pri­vate eq­uity firm Har­bour En­ergy is push­ing ahead with its bid to take over San­tos which, if com­pleted, would be one of the na­tion’s big­gest re­source deals.

Har­bour, led by for­mer Shell ex­ec­u­tive Linda Cook, has lodged a firm bid for San­tos at $US4.98 a share, the South Aus­tralian oil and gas pro­ducer said yes­ter­day. That is the same price it first of­fered seven weeks ago but the lat­est of­fer in­cludes pay­ing all share­hold­ers at a float­ing ex­change rate.

That change will ben­e­fit lo­cal share­hold­ers pro­vided the Aus­tralian dol­lar does not strengthen against the green­back.

The bind­ing but con­di­tional of­fer also al­lows San­tos’ two big­gest share­hold­ers — Chinese nat­u­ral-gas dis­trib­u­tor ENN Group and pri­vate-eq­uity firm Hony Cap­i­tal — to roll their stakes into a new Har­bour in­vest­ment ve­hi­cle that would own San­tos.

This op­tion is not avail­able to other share­hold­ers. ENN and Hony own 15 per cent of San­tos.

The new clause pos­si­bly in­di­cates they are will­ing to back Har­bour’s takeover.

San­tos chair­man Keith Spence said yes­ter­day the board would con­sider the of­fer and ad­vised share­hold­ers to take no ac­tion.

This month Mr Spence hinted Har­bour would need to up its bid given the rise in oil prices since Har­bour ap­proached San­tos on April 3. A barrel of crude oil has risen 17 per cent to nearly $US80.

Mr Spence said the most re­cent pro­posal still de­pended on Har­bour do­ing fi­nal due dili­gence. He cau­tioned any deal needed Foreign In­vest­ment Review Board ap­proval.

Clearing FIRB has been viewed by some an­a­lysts as the key hur­dle, given con­cerns about one of the na­tion’s big­gest and lo­cally owned oil and gas pro­duc­ers fall­ing into foreign hands at a time when man­u­fac­tur­ers are strug­gling to get af­ford­able gas.

“There is no cer­tainty the re­vised Har­bour pro­posal will re­sult in an of­fer for San­tos that is ca­pa­ble of be­ing con­sid­ered by share­hold­ers,” Mr Spence said yes­ter­day.

Citi an­a­lyst James Byrne said he agreed with Mr Spence’s re­cent com­ments that San­tos share­hold­ers needed to be com­pen­sated for higher oil prices. “It is less than likely the board will rec­om­mend the bid as it stands,” Mr Byrne said yes­ter­day.

Mac­quarie Se­cu­ri­ties an­a­lyst Andrew Hodge said: “With only two weeks since the an­nual gen­eral meet­ing where the San­tos chair­man im­plied this of­fer was not suf­fi­cient, we would an­tic­i­pate the board rec­om­mend­ing to re­ject.”

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