Santos sniffs at Harbour bid
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.”