Harbour Sweetens Santos Takeover Bid

Harbour Energy has sweetened its takeover offer for Australian Santos, lifting it to A$14.4bn ($10.84bn), following it last week making a binding bid for the company, Santos said May 21.

The new offer is for $5.21 (A$6.95) per share, which compares with the previous proposal of $4.98 per share. The revised proposal is conditional on Santos undertaking additional hedging of oil-linked production in 2018 of about 30% and changes to hedging in 2019.

Harbour has also indicated that 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.

RBC Capital Markets analyst Ben Wilson said Harbour’s return with a higher bid is surprising and talked down suggestions it was in response to strong oil prices.

“We do not buy into the notion that the Harbour bid needed to be raised again to compensate for moves in the oil strip, as we perceived the standing bid as factoring in a reasonable forward view of oil prices and remaining execution risks around Santos growth projects and base business,” he said.

“Contrary to our views, however, the new higher bid underlines Harbour’s desire to receive the board recommendation it needs and in our view staves off any ambitions from an interloper,” he added.

He said the nature of the bid indicates that Harbour engagement with the Santos board is high and a recommendation could be forthcoming this week.

The revised proposal remains subject to conditions, including completion of final confirmatory due diligence and approval from the Foreign Investment Review Board as well as shareholders.