Australian Santos Rejects Harbour’s Takeover Proposal
Australian Santos has rejected Harbour Energy’s $10.84bn (A$14.4bn) takeover proposal and terminated discussions, Santos said May 22.
“After careful consideration of all aspects of the Final Proposal, the Santos independent directors and Managing Director and CEO have unanimously resolved to reject the Final Proposal on the basis that it 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,” Santos said.
Earlier in the week, Harbour, which is an energy investment vehicle for US EIG Global Energy Partners, sweetened its offer for Santos, lifting the offer to $5.21 per share from a previous proposal of $4.98 per share. The revised proposal was conditional on Santos undertaking additional hedging of oil-linked production in 2018 of about 30% and changes to hedging in 2019.
Harbour also said the offer price would be increased to a US dollar equivalent to A$7/share if Santos agreed to hedge 30% of oil linked production in 2020.
“The consideration would be in US dollars and Santos would be subject to fluctuations in the AUD/USD exchange rate, with no adjustment if the US dollar depreciated against the Australian dollar,” Santos said.
“Since receipt of the Indicative Proposal, Brent oil prices have increased by 14% and the share prices of other major ASX-listed energy peers by an average of 18%. The Santos business has continued to perform well and is generating strong cash flow,” the company added.
RBC Capital Markets analyst Ben Wilson said Santos’ rejection was a shock and that this will likely mark the end of Harbour’s pursuit for Santos.
“Our outsider’s view is that Harbour has gone to great lengths to furnish the Santos board with an attractive bid, having upped its bid up to six times with no credible interloper in sight, engaged its major 15% shareholder ENN/Hony and put in place bid financing,” he said.
“Harbour management and advisers will be rightly asking themselves what more can they do. The nature of the shareholder arrangement between ENN/Hony and Santos essentially precludes a hostile approach. We think Harbour’s Santos ambitions are dead,” he said.