Harbour Makes 'Knock-out Bid' for Oz Santos
Australia’s second largest independent oil and gas producer Santos has received a fourth takeover proposal from US private equity-backed Harbour Energy that one analyst has described as a knock-out.
The proposal to acquire 100% of Santos’ share is for an indicative offer price of $4.98/share (A$6.50/share) values the company at $10.3bn and is a premium of 28% to the company’s last closing price of A$5.07/share and 30% above the one month volume weighted average, Santos said April 3.
“The Santos board considers that, based on the indicative offer price of A$6.50/share, it is in the interests of shareholders to engage further with Harbour,” Santos said. “Accordingly, Harbour has entered into a confidentiality agreement with Santos to allow Harbour the opportunity to undertake confirmatory due diligence,” it said.
RBC Capital Markets analyst Ben Wilson said: “We do see this latest Harbour Energy approach as a knock-out bid,” one which the Santos board will struggle to turn 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 asset-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.
The Harbour proposal follows three unsolicited bids from the company, being: August 14 2017, an indicative offer price of A$4.55/share, March 22 2018 an indicative offer price of A$6.25/share, and March 27 an indicative offer price of A$6.37/share.
Santos has five core, long-life gas and LNG assets which include the Gladstone LNG facility in Queensland; its Northern Australia business which includes a partnership in Darwin LNG; its Western Australia and Cooper Basin gas assets; and interests in Papua New Guinea which includes the PNG LNG project.
Wood Mackenzie principal analyst Saul Kavonic said the prize LNG asset is the stake in PNG LNG, followed by GLNG and the ageing Darwin LNG plant.
“Santos’ peripheral southeast Asian assets will likely remain candidates for divestment. The domestic gas assets on the west coast would also appear a nice cash generator, but could be a candidate to spin off later, as they are peripheral to an LNG focus,” he said.
Harbour said its strategy for Santos is to use the 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. “Global energy markets are changing rapidly as we move to a lower carbon energy mix and we believe natural gas is one of the primary sources of energy for the future,” chairman of Harbour and CEO of EIG R. Blair Thomas said.
“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 realising that vision,” he said.
Harbour is an energy investment vehicle formed by US EIG Global Energy Partners to pursue control and near control investments in high-quality upstream and midstream energy assets globally. EIG, through Harbour Energy, also backed Chrysaor's $3bn acquisition of UK North Sea gas and oil assets from Shell last year.