Oz Santos Receives Binding Takeover Bid from Harbour

US EIG Global Energy Partners’ energy investment vehicle Harbour has backed up its indicative US$10.3bn takeover proposal made April 3 for Australian independent Santos with a binding, conditional, bid which involves no change in the share price offer, Santos said May 17.

The A$13.7bn takeover bid for Australia’s second largest oil and gas producer is at the same price made several weeks ago of US$4.98/per share and follows five weeks of due diligence.

It does, however, include a number of “significant changes” to the transaction structure previously announced. These changes include:

• A US dollar offer of cash consideration for shareholders other than ENN and Hony, with no fixed Australian dollar component; and

• An offer to ENN and Hony to roll-over their existing Santos shares into a Harbour investment vehicle and subscribe for new shares.

“The independent directors of Santos will consider the Revised Harbour Proposal and will update shareholders accordingly,” Santos said.

There is no certainty that the revised proposal will result in an offer for Santos that is capable of being considered by shareholders and the company’s shareholders are advised to take no action at this time, Santos said.

The revised proposal remains subject to the completion of due diligence and the transaction needs to be recommended by the independent directors of the Santos board as well as requiring the Foreign Investment Review Board and shareholder approval conditions, it said.

The previous indicative proposal was the fourth made for Santos by Harbour which analysts at the time said was attractive.

RBC Capital Markets analyst Ben Wilson said at the time: “We do see this latest Harbour Energy approach as a knock-out bid”.

He said the Santos board would struggle to turn it down, particularly in the wake of recent board changes.

“The Santos board has completed a period of transition and now has few remaining ties to the company’s past. The prior Board had knocked back a number of offers including the previous ass-cash bid by Brunei and UAE backed Scepter Partners at A$6.88/share,” he said.

“With new Santos Chairman Keith Spence recently taking over from long-term Chair Peter Coates and a number of new Directors in place, we think it is a lot more likely for the current offer to receive support from the Santos Board than on previous occasions,” he added.

Harbour previously said its strategy for Santos is to use to company’s core assets as a platform for growth in Australia and Asia and that it intends to pursue the acquisition of additional gas and LNG assets both in Australia and internationally.

“Harbour has a vision to be a leading global player in natural gas and LNG and the action we are announcing today is an important step in realizing that vision,” chairman of Harbour and CEO of EIG R. Blair Thomas said.