Currency swings cut both ways in Harbour’s Santos deal

Illustration: Rod Clement

New Santos chairman Keith Spence and his board of directors will be sleeping with one eye fixed on the Aussie dollar as Linda Cook’s Harbour Energy undertakes due diligence on its local oil and gas takeover target.

Every 1c movement in the Aussie relative to its US counterpart has a $167 million impact on the value of Harbour’s $13.5 billion offer for the Adelaide-based Santos.

Harbour won’t guarantee the Aussie value of its offer for Santos retail shareholders until after its due diligence is done and bid docos are signed.

That window could be as short as four weeks, but potentially much longer.

Either way, plenty of time for US President Donald Trump to up-end global currency markets with a few Tweet storms cooked up in the White House bathroom.

Tweeter in chief: US President Donald Trump

Not to mention what he could do to the oil market, ­another key moving part in Harbour’s bold offer.

Trump’s Twitter feed is going to be even more compulsive reading for the roughly 118,000 shareholders who control about 14 per cent of the Santos register.

Harbour has bid $US4.98 a share for Santos, which when announced was equal to $6.50 a share when the currency was worth US76.62c.

If the value of the cross currency increases by US1c, the Aussie value of the Harbour offer drops by about 8c to $6.42 a share.

If the currency falls more, say by US5c, the Harbour offer would be worth about $6.10 a share. That would save Harbour about $835m.

A tumble like that would put extreme pressure on Spence and his CEO Kevin Gallagher to ask Harbour to top up its bid to keep the actual price for Aussie retail investors at $6.50. Harbour would argue its $US4.98 offer is already full and would not want to compensate for downside local currency risk.

But on the flip side, if the value of the greenback relative to the Aussie falls, Santos investors will be better off by 8c for every Santos share they hold. For the 13.85 per cent retail base, that’s a $22m gain. The risk cuts both ways.

Meantime, Margin Call notes that our shoutout for Cook’s milestone 60th birthday was somewhat premature.

The Harbour boss and former Shell heavy-hitter will in fact celebrate her birthday not today but on June 4. Turns out her corporate paperwork was filled in by an American colleague who got the dates the wrong way around.

A minor cultural miscommunication and nothing like the culinary calamity Cook’s boss Blair Thomas endured last week at Crown Perth.

PM’s chutzpah

Maybe Alinta Energy’s Jeff Dimery is serious when he says — after a bit of prodding — that he wants to buy AGL’s rickety Liddell power station.

That transaction was first suggested to Dimery by Prime Minister Malcolm Turnbull in a Trumpian phone call last Thursday.

Margin Call understands that Dimery, who has been in the top job at the energy group for a year, has since formally appointed corporate advisers to assist with any potential deal with Andy Vesey’s AGL.

For its part, AGL first considered selling Liddell about 5pm on Tuesday when Turnbull, still with his investment banking hat on, called AGL chairman Graeme Hunt to inform him Dimery’s Alinta would be in touch in the morning. Donald Trump himself would be impressed with that deal-making chutzpah.

Illustration: Rod Clement

So who are on the hastily scrambled Alinta buy side (in addition to Goldman Sach’s alumnus Turnbull and Deutsche Bank alumnus Josh Frydenberg, who in between advisory work acts as the Energy and Environment Minister)?

All eyes are on Lazard’s Melbourne-based managing director Andrew Leyden, Alinta’s go-to deal-making banker, who is considered by his peers as effectively the group’s house adviser.

The appointment of a rival firm or more junior banker to help Alinta on any $1bn deal with AGL would shock the market and would likely reflect a lack of serious intent by Dimery.

Leyden declined to comment when asked whether he was working for his regular client on the Liddell bid.

Margin Call understands whatever work Leyden, or other advisers, may have done on the current transaction is very much in its infancy.

AGL has traditionally chosen Rothschild’s Danny Bessell to undertake its advisory work. Managing director Bessell is assisting Vesey in the divestment of a range of minor generation assets around the country as it finetunes its power portfolio, but Margin Call understands there’s been no appointment on the sell side so far.

It seems at this point, the PM is very much lead adviser — on both sides of the deal.

Turnbull and Frydenberg want Alinta to buy Liddell to extend its coal-powered operating life beyond AGL’s planned 2022 closure (after which Vesey has promised to transform the site into a green energy nirvana).

Alinta’s elongation of the coal plant would solve a major problem for the Turnbull government, which is under assault by a group of Lycra-clad Coalition coal socialists brazenly riding under the banner of John Monash.

Gurners up sticks

There was no time to stop for fancy smashed avocado on sourdough and a large almond milk latte yesterday for luxury property developer Tim Gurner, worth an estimated $500m on the Stensholt Index.

Developer Tim Gurner is moving to Toorak’s prestigious Hopetoun Road. Picture: Josie Hayden

It was moving day for the outspoken businessman, who turns 36 this Saturday, and his young family.

Their destination: the $17.02m modern mansion on Toorak’s prestigious Hopetoun Road, on which they settled a fortnight ago.

The super-private mega home, which boasts a tennis court and pool, is mortgaged to Andrew Thorburn’s National Australia Bank and is held in the name of Gurner’s wife Aimee.

Gurner, self-appointed financial adviser to Millennials struggling to crack into the housing market, is moving from his nearby home on Kooyong Road. Aimee bought that place for $5.3m in 2014 before its recent sale for a mooted $9m (although that transfer is yet to take place). Last year Gurner denied the home was for sale.

The family’s new neighbours on Hopetoun Road include Flagstaff Partners’ Tony Burgess. Premier’s Mark McInnes and former ANZ boss Mike Smith until recently owned mansions on the trophy street.