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Santos targeted by new, $13.5bn bid from EIG Global Energy Partners

Santos shares jumped by over 20pc after Harbour Energy’s new, $13.5bn takeover offer for the oil and gas producer.

Canadian coring technician Rick Forster at Santos' Tanumbirin oil and gas exploration well near the MacArthur River.
Canadian coring technician Rick Forster at Santos' Tanumbirin oil and gas exploration well near the MacArthur River.

US private investment firm EIG Global Energy Partners has made a $13.5 billion bid for Santos through its Linda Cook-run Harbour Energy unit.

The offer, which follows three previous unsolicited bids, was confirmed this morning.

Harbour, which had a bid for Santos rejected last year, has been granted due diligence on the Adelaide oil and gas company after making an improved offer of $6.50 a share.

Santos (STO) shares last traded at $5.07, meaning the bid is at more than a 28 per cent premium to the last traded share price, which valued the company at $10.56bn.

Santos shares soared after today’s announcement, rising by more than 20 per cent to as high as $6.20. At 11.51am (AEST) they were up 19.7 per cent at $6.07.

The new bid is a cash offer of $US4.98 per share, including a US28 cent special dividend that will give Australian shareholders a 16c per share extra boost through franking credits.

It is to be done through a scheme of arrangement, requiring 75 per cent of shares to be voted in favour of the deal, and is conditional on 15 to 20 per cent of shares remaining with the company by rolling over into an unlisted Harbour vehicle.

This will allow major Santos shareholder, China’s privately-owned ENN, to remain invested.

“The Santos board considers that, based on the indicative offer price of $A6.50 per 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.”

However it added: “There is no certainty at this time that the Harbour proposal will result in an offer for Santos that is capable of being considered by shareholders.

“Directors therefore advise that Santos shareholders take no action in relation to the Harbour

proposal at this time.”

Harbour said it planned to use Santos as a platform for growth in Australia and Asia and in LNG.

“Harbour expects to invest further in Santos’s existing assets and to pursue the acquisition of additional natural gas and LNG-focused assets in Australia and internationally,” Harbour said.

“These plans are expected to contribute to Australian domestic energy security and economic

growth.”

It said there would not be staff reductions.

“Furthermore, there is no intention to relocate the Santos headquarters from Adelaide.”

Harbour is owned by EIG and run by former Shell executive Ms Cook, who gained a good understanding of the Queensland coal seam gas fields Santos is heavily invested in when Shell successfully bid for Arrow Energy in 2010.

Ms Cook, in an interview with The Australian from Houston, made it clear she was aware of the political sensitivities of the Australian gas market, saying it was essential to ensure the local market had adequate supply.

“No LNG project can be successful if the domestic market cannot be adequately supplied,” she said.

Ms Cook said she was planning to invest more in upstream gas in Australia and offshore.

She said Santos’s 15 per cent shareholders ENN Group and Hony Capital would be offered a chance to be part of the private company if Harbour was successful in acquiring control of Santos.

She noted: “They have indicated they are long term strategic holders and it will be interesting to see if they want to join the new company.”

The latest of Harbour’s three approaches to Santos came on March 22, culminating in this morning’s announcement of a $6.50-a-share bid.

Ms Cook said “it is premature to talk about management of any new vehicle but (Santos chief) Kevin Gallagher and his team have done a very good job with the assets”.

AGL and Andrew Forrest have raised the prospect of import terminals on the east coast to solve Australia’s gas supply problem but Ms Cook said: “We are more interested in investing in upstream assets.”

She said her aim was to expand Santos both domestically and offshore and was keen for “responsible exploration.”

Harbour Energy’s Linda Cook.
Harbour Energy’s Linda Cook.

EIG considers itself a long-term private investor, not in the mould of traditional private equity firms that look to exit assets in a certain time frame for a profit.

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Original URL: https://www.theaustralian.com.au/business/mining-energy/santos-targeted-by-new-13bn-bid-from-eig-global-energy-partners/news-story/c52f65752d3fdf1b126b8d5ce99bd15f