Harbour Energy declares raised bid for Santos is ‘final’
Harbour Energy says it will not raise its latest $14.5bn bid for Santos after sweetening it twice in the past three days.
US private energy firm Harbour Energy has declared it will not raise its latest $14.5 billion bid for Santos, at $US5.21 a share, after sweetening it twice in the past three days.
The move puts the ball in the Santos court on whether it accepts the highly conditional proposal that requires Santos to boost its oil price hedging to go ahead.
“Harbour proposed this increase following discussions with Santos over the weekend in which Harbour indicated a willingness to provide a higher offer price for the shareholders in return for Santos agreeing to implement oil hedging out to 2019, within its existing hedging policy,” the US predator said in a statement today.
“Harbour’s May 21, 2018 proposal is ‘best and final’ and will not be further increased prior to entering into a scheme implementation deed,” Harbour said.
The revised offer translates to about $6.95 per share.
Santos (STO) said earlier it would consider the offer.
“There is no certainty that the revised Harbour proposal will result in an offer for Santos that is capable of being considered by shareholders,” the company said.
“Santos shareholders are advised to take no action in relation to the revised Harbour proposal at this time.”
The offer appears in a ballpark Santos is comfortable and RBC Capital Markets analyst Ben Wilson said he expected Santos directors to recommend it to shareholders as early as this week.
But the hedging is a complex matter that will reduce shareholders’ exposure to oil price gains if the bid falls through.
Harbour Energy’s bid, backed by large shareholders ENN and Hony Capital, requires 75 per cent share holder support, which hinges on it being recommended by Santos directors.
RBC Capital Markets analyst Ben Wilson said it would appear that Santos’s board was now highly engaged with Harbour Energy.
Mr Wilson said the bank believed the initial bid of $US4.98 was fair value for Santos.
“The new higher bids underline Harbour’s desire to receive the board recommendation it needs and in our view staves off any ambitions from an interloper,” he said.
“The nature of the revised bids and the timing of the offers, with one received on Saturday and another one on Monday, suggest to us that engagement with the Santos board is high and a recommendation may be forthcoming this week.
“The additional caveats around hedging would seem to us to be a requirement of lenders to Harbour.”
Harbour said the extra hedging was not required to support Habour’s financing, but meant it could reduce transaction costs and boost the offer price.
Santos shares were today trading nearly 3 per cent higher at $6.42.
Harbour’s initial, formal $US4.98 bid lodged last Wednesday was equal to an earlier approach that had let the predator conduct a five-week due diligence that raised no major issues.
The bid, which Santos did not comment on but was seen by the board as too low because of recent rises in the oil price, was conditional on approval by a scheme of arrangement and Foreign Investment Review Board approval.
The new hedging conditions are that Santos undertakes extra hedging of oil-linked production in 2018 of about 30 per cent and makes changes to hedging in 2019.
Santos said Harbour has indicated the offer price would be increased to a US dollar amount equivalent to $7.00 a share if Santos agrees to hedge 30 per cent of oil-linked production in 2020.
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