PERTH (miningweekly.com) – Oil and gas major Santos has rejected the takeover offer from suitor Harbour Energy, telling shareholders on Wednesday that its own strategy would deliver more shareholder value.
Harbour earlier this week increased its cash bid for Santos from $4.98 a share previously offered, to $5.21 a share.
However, the revised proposal was conditional on Santos undertaking additional hedging of oil-linked production in 2018 of about 30%, as well as changes to its 2019 hedging.
In addition, Harbour also indicated that the offer price will be increased to the US equivalent of A$7 a share if Santos agrees to hedge 30% of oil-linked production in 2020.
Meanwhile, Santos’ major shareholders ENN Ecological Holdings and Hony Capital had been offered the opportunity to roll over their existing Santos shares into a Harbour investment vehicle, and subscribe for new shares.
This option had not been made available to other Santos shareholders.
Santos’ independent directors, as well as its MD and CEO have unanimously resolved to reject the Harbour offer, with the company saying that the offer did not represent fair value for Santos, and when combined with associated risks, was not in the best interest of shareholders.
Santos said that the final proposal from Harbour had a highly leveraged equity-backed structure that, prior to implementation, would have required Santos to provide significant support for Harbour’s debt raising, and to hedge a significant proportion of oil-linked production.
Furthermore, Santos noted that the Harbour offer was complex, and had treated shareholders unequally, offering Santos’ largest shareholders an opportunity to remain invested in Santos, while not extending the same offer to minor shareholders.
Instead, the company was backing its own strategies, with the oil and gas major expecting to reach a net debt target of A$2-billion by 2019, more than a year ahead of schedule.
“Santos has a well-developed strategy, strong leadership and management team and outstanding growth opportunities that the board believes will deliver superior value for its shareholders over time,” said Santos chairperson Keith Spence.