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    STO   AU000000STO6

SANTOS LIMITED

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Australia's Santos gets final sweetened $10.8 billion bid from Harbour Energy

05/20/2018 | 11:37pm EST
FILE PHOTO: The logo of Australian oil and gas producer Santos Ltd is pictured at their Sydney office

(Reuters) - U.S.-based Harbour Energy made a final offer of $10.8 billion for Australia's Santos Ltd on Monday, hiking its bid for a fifth time in nine months after a steep rise in oil prices and potentially deterring any rival bids.

Shares in the oil and gas producer rose on the back of the sweetened bid but remained below the offer price amid uncertainty over whether the government would approve what would be the biggest takeover of an Australian resources company.

"You've got to think the new bump is going to make it more likely the board will approve it...But there are risks," said Andy Forster, senior investment officer at Argo Investments, a top 10 shareholder in Santos.

Analysts have said the government might raise concerns that a takeover could dent gas supply on Australia's east coast and could even raise questions about foreign companies not paying enough tax in Australia.

A succesful bid would give Harbour access to a recently revived company with a low cost of gas production and stakes in liquefied natural gas (LNG) in the Asia-Pacific, where demand is soaring.

Harbour's latest offer, raised twice over the past five days, is equivalent to A$6.95 a share at an exchange rate of 75 U.S. cents to 1 Australian dollar, and is at an 11-percent premium to the last close of Santos shares on Friday.

"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," Royal Bank of Canada analysts said in a note on Monday.

Argo's Forster said the prospect of receiving a special dividend with Australian tax credits attached as part of the bid was attractive. The special dividend would take the total bid value for local investors to around A$7.15 a share.

The latest proposal, up 4.6 percent from an earlier offer, is conditional on Santos increasing its hedging of oil-linked production in 2018 and 2019, Santos and Harbour said.

Harbour said the offer price would be increased slightly to a U.S. dollar amount equivalent to A$7.00 per share if Santos agreed to hedge 30 percent of oil-linked production in 2020, too.

"Harbour's 21 May 2018 proposal is 'best and final' and will not be further increased prior to entering into a Scheme Implementation Deed," Harbour said in an emailed statement.

The requirement for Adelaide-based Santos to lock in more of its oil-linked contracts at today's higher oil prices will help protect cash flows needed to pay down debt.

Harbour wants Santos to line up the hedges as the Australian company can do it more cheaply than Harbour can, a person close to the transaction said.

"This additional hedging is not required to support Harbour's financing, but rather enables us to reduce transaction costs and increase the offer price," Harbour said.

Oil prices have risen about 17 percent since Santos received Harbour's $4.98 per share offer in April. [O/R]

Independent directors of Santos will consider the revised Harbour proposal, the company said.

(Reporting by Sonali Paul; additional reporting by Chris Thomas in Bengaluru; editing by Richard Pullin)

By Sonali Paul


ę Reuters 2018
Stocks mentioned in the article
ChangeLast1st jan.
BEST INC. 7.16% 0.9912 Delayed Quote.-51.41%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) -0.29% 0.78783 Delayed Quote.-0.22%
EURO / AUSTRALIAN DOLLAR (EUR/AUD) 0.14% 1.58453 Delayed Quote.0.89%
MIRAINOVATE CO., LTD. -0.44% 226 End-of-day quote.-24.67%
SANTOS LIMITED 2.28% 6.73 End-of-day quote.7.34%
US DOLLAR / CANADIAN DOLLAR (USD/CAD) 0.30% 1.26916 Delayed Quote.-0.64%
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More news
Analyst Recommendations on SANTOS LIMITED
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Financials (USD)
Sales 2021 4 636 M - -
Net income 2021 907 M - -
Net Debt 2021 2 981 M - -
P/E ratio 2021 10,8x
Yield 2021 2,47%
Capitalization 10 014 M 10 015 M -
EV / Sales 2021 2,80x
EV / Sales 2022 2,21x
Nbr of Employees 2 722
Free-Float 80,9%
Chart SANTOS LIMITED
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Santos Limited Technical Analysis Chart | STO | AU000000STO6 | MarketScreener
Technical analysis trends SANTOS LIMITED
Short TermMid-TermLong Term
TrendsNeutralNeutralNeutral
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus BUY
Number of Analysts 13
Last Close Price 4,82 $
Average target price 6,35 $
Spread / Average Target 31,6%
EPS Revisions
Managers and Directors
Kevin Thomas Gallagher Chief Executive Officer, MD & Executive Director
Anthony Neilson Chief Financial Officer
Keith William Spence Non-Executive Chairman
David Banks Chief Technical & Marketing Officer
Hock Goh Independent Non-Executive Director
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