Sydney:Australian energy giant Santos has rejected a US$10.9 billion takeover bid by US private investment firm Harbour Energy as too low and high risk, terminating all discussions.
Santos, a major oil and natural gas firm with interests notably in Papua New Guinea, received a proposal of US$5.21 per share on Monday. That is equivalent to Aus$6.95, and 4.6 percent higher than the Aus$6.50 Harbour initially offered in early April.
But it was still not considered enough, with oil prices up 14 percent since the first bid was made. Santos said in a statement on Tuesday evening that the deal “does not represent a full value of the company and, when combined with the associated risks, is not in the best interests of Santos shareholders”.
The revised proposal on Monday had been conditional on Santos undertaking extra hedging of oil-linked production in 2018 of about 30 percent, and make changes to hedging the following year. Harbour indicated the price would be further increased to a US dollar equivalent to Aus$7 a share if Santos agreed to hedge 30 percent of oil-linked production in 2020.
Santos said the transaction structure was complex, high risk and provided too much uncertainty for shareholders. “Santos has a well-developed strategy, strong leadership and management team and outstanding growth opportunities that the board believes will deliver superior value for its shareholders over time,” said chairman Keith Spence.
Harbour, an energy investment vehicle formed by private equity firm EIG to acquire high-quality upstream and midstream assets globally, had planned to fund the deal with a high level of underwritten debt.
While Santos has stakes in oil and gas production in several countries, including Indonesia and Vietnam, its main assets include 13.5 percent of Exxon Mobil’s massive liquefied natural gas venture in Papua New Guinea. It also has operations throughout Australia. SANTOS LTD
