Image courtesy of SantosAustralia’s Santos, the operator of the GLNG project on Curtis Island, has rejected the takeover bid made by the EIG Global Energy Partners-backed investment firm Harbour Energy.
On May 21, Santos received a conditional binding offer from Harbour Energy to acquire 100 percent of Santos shares by way of a scheme of arrangement at a cash price of US$5.21 per share, totaling $10.8 billion.
Harbour indicated that it would be willing to increase its offer to $5.25 per share if Santos was willing to extend certain oil price hedging arrangements.
Harbour subsequently confirmed that the price offered under the final proposal was ‘best and final’ and followed a seven-week period of engagement with Harbour on the price and terms of an indicative proposal made on April 3, 2018.
“Following extensive due diligence, the final proposal price was increased by 4.6percentt to US$5.21 per share from the price of US$4.98 per share in the indicative proposal. The consideration would be in US dollars and Santos shareholders would be subject to fluctuations in the AUD/USD exchange rate, with no adjustment if the US dollar depreciated against the Australian dollar,” Santos’ statement reads.
Since receipt of the indicative proposal, Brent oil prices have increased by 14percentt and the share prices of other major ASX-listed energy peers by an average of 18 percent, Santos said adding that the business has continued to perform well and is generating strong free cash flow.
“The final proposal was a highly leveraged private equity-backed structure that, prior to implementation, would have required Santos to provide significant support for Harbour’s debt raising and to hedge a significant proportion of oil-linked production,” the statement reads.
In addition, the final proposal was stated to be subject to various conditions, including FIRB approval and restrictions on the conduct of Santos’ business from the time of entering into the scheme implementation deed until implementation.
Following consideration of all the aspects of the final proposal, Santos independent directors and managing director and CEO have unanimously decided to reject the bid, on the basis that does not represent a full value of the company and is not in the best interest of the company’s shareholders.
Accordingly, Santos has now terminated all discussions with Harbour Energy, the statement reads.
In rejecting the proposal, Santos noted that it believes it would realize superior shareholder value by executing its current strategy, adding that the offer price was too low in addition to the complex private equity transaction, high risk and uncertain treatment of shareholders.