PERTH (miningweekly.com) – Oil and gas major Santos on Tuesday confirmed a failed bid to gain control of fellow listed Oil Search earlier this year.
Oil Search yesterday revealed that it had received a confidential, non-binding indicated change of control proposal, which the company and its advisers had rejected, as it was determined not to be in the best interest of shareholders.
Santos on Tuesday revealed that on June 25, the company had submitted a confidential, non-binding indicative all-scrip merger proposal to the Oil Search board, offering Scheme of Arrangement under which Oil Search shareholders would receive 0.589 new Santos shares for each Oil Search share held.
The takeover would have given Oil Search shareholders ownership of 37% of the merged group and Santos shareholders 63%.
The ownership ratio implied a transaction price of A$4.25 per Oil Search share, based on Santos’ closing price on June 24, representing a 12.3% premium to the Oil Search closing price on the same date of A$3.78 and a 9.8% premium to the Mubadala block trade sale price of A$3.865.
Santos said on Tuesday that it has sought to engage the Oil Search board on the transaction rationale and the opportunity for Oil Search shareholders to participate in the value created by the merger, saying the potential merger of Santos and Oil Search is a logical combination of two industry leaders to create an unrivalled regional champion of size and scale.
The merged entity would have a pro forma market capitalisation of A$22-billion, which positions it in the top-20 ASX-listed companies and the 20 largest global oil and gas companies, and would hold a diversified portfolio of high quality, long-life assets across Australia and Papua New Guinea.
Furthermore, Santos argued that the merged entity would have a robust balance sheet with strong liquidity that can self-fund growth options and an investment grade credit rating, and would have a larger portfolio of development assets and opportunities for optimisation.
A number of synergies were also identified, along with an expected re-rating in the share prices.
“The combination would create greater alignment in Papua New Guinea supporting the development of key projects including Papua liquefied natural gas (LNG), deliver new jobs and help support the local economy,” the company said on Tuesday.
“Santos has put forward the prospect of a genuine merger where the ownership of the merged entity is based on relative contribution and value. Oil Search shareholders continue to participate in the merged entity and retain the opportunity to realise a premium for control as part of the merged entity. The strategic rationale for a merger is clear and offers superior value to Oil Search shareholders rather than continuing on a standalone basis.
“Santos continues to believe that the merger proposal represents an extremely attractive opportunity to deliver compelling value accretion to both Santos and Oil Search shareholders,” the company added.