Gas producer Santos rejects US$7.2bil takeover bid

MELBOURNE: Australian gas producer Santos Ltd said it rejected a A$9.5bil (US$7.2bil) takeover approach in August, sending its shares up 13% on speculation another offer was likely to emerge.

Santos, with stakes in three liquefied natural gas (LNG) projects in a region where gas demand is soaring, said it rebuffed the approach from private equity-backed Harbour Energy as too cheap and has not received a further proposal.

It revealed the August approach after a newspaper reported that US-based Harbour, led by a former executive director of

Royal Dutch Shell Plc, Linda Cook, was set to make a bid worth around A$11bil.

Santos said in a statement it had turned down the “non-binding conditional and indicative” takeover proposal from Harbour at A$4.55 a share, but said it had no current proposal from Harbour and was not in talks with the group.

The Australian Financial Review said Harbour is lining up a bid of around A$5.30 a share, well above analysts’ average price target of A$4.26, according to Thomson Reuters data.

Harbour Energy’s general counsel declined to comment.

“Linda was an architect of Shell’s LNG business in Australia and had overseen its development. It is therefore not surprising that Linda would be interested in getting involved in Australian LNG with Harbour,” a source familiar with the matter told Reuters.

Santos, whose shares hit a 15-month high of A$4.97 yesterday, also rejected a A$7.1bil proposal in 2015 from a fund backed by the ruling families of Brunei and the United Arab Emirates, at a time when the company was saddled with nearly A$9bil in debt.

Analysts said a bid even at A$5.30 was unlikely to be accepted by a company that has since slashed debt, cut costs and is poised to benefit from rising oil and gas prices at its Gladstone LNG project, Papua New Guinea LNG, Australia’s Cooper Basin and offshore northern Australia.

The main prize in Santos is its stake in the Papua New Guinea LNG project, run by ExxonMobil Corp. — Reuters