Santos lures bids after rejecting $7.2bn offer

Bloomberg

A bid for Santos Ltd. may trigger counter offers for the Australian
oil and gas producer that has stakes in some of the world’s cheapest
liquefied natural gas.
The Adelaide-based company surged the most in a year after saying it received and rejected a A$9.5 billion ($7.2 billion) takeover approach from Harbour Energy Ltd. led by former Royal Dutch Shell Plc executive Linda Cook. Harbour is preparing to make another cash offer of about A$5.30 a share within weeks, according to a person with knowledge of the situation, confirming an earlier report by the Australian Financial Review.
“An opening offer is rarely the best or last action and could also awaken any number of interested parties from a slumber–think Woodside Petroleum for starters,” according to a research note from Morningstar Inc.
A potential bid from Harbour may also flush out a rival offer from Santos’ largest shareholders, ENN Group and Hony Capital Ltd., Evans & Partners Pty Senior Research Analyst Andrew Hines wrote in a note. ENN and Hony hold about a 15 percent stake in Santos and in June agreed to coordinate investments with the Australian explorer in upstream gas and LNG production.
Santos rejected the non-binding proposal received in August from Harbour because the price of A$4.55 a share “was inadequ-
ate and funding was uncertain,” Chief Executive Officer Kevin Gallagher said in an emailed statement. Harbour is a joint venture between embattled commodity trader Noble Group Ltd. and resources investment house EIG Global Partners.
OTHER SUITORS
“If a credible bid is presented” then “other potential future Santos acquirers, such as existing shareholder ENN, could consider avenues to enter the fray,” Wood Mackenzie Ltd. analyst Saul Kavonic said in an email.
Santos shares, which jumped 13 percent to close at the highest since August 2016, added 1.5 percent to A$5.025 at 1:53 p.m. in Sydney. A bid of around A$6.50 a share is required for a “serious discussion,” Credit Suisse Group AG analyst Mark Samter wrote in a note.
Any deal to buy the Australian energy company would give
the buyer control of the Gladstone liquefied natural gas plant in Queensland as well as an 11.5 percent stake in the ConocoPhillips-run Darwin LNG facility and a
13.5 percent holding in Exxon
Mobil Corp.’s Papua New Guinea LNG project.