It has been a while coming, but Santos (STO) finally took its first real takeover approach aimed at exploiting its weakened state, courtesy of the slide in oil and gas prices and the havoc they have caused in the company’s balance sheet and profit and loss account.
Santos yesterday revealed it has rejected a non-binding takeover offer of $6.88 cash for each share from Scepter Partners, a mysterious Bermuda based company representing rich oil and gas investors from the Middle East and Asia.
The $6.88 a share price values Santos at $7.1 billion. It is the second opportunistic play in the local oil and gas sector – Woodside has launched an all paper offer for Oil Search worth $11.6 billion.
Santos said the offer was opportunistic and didn’t reflect the fair underlying asset-value of the Australian oil-and-gas company.
Santos shares have fallen sharply over the last year, from more than $14 as late as September 2014 and closed Wednesday at $5.44, meaning the $6.88 offer was a rather tiny premium of 26%.
Santos shares hit a high of $6.56 yesterday and closed up 16% at $6.32.
STO 1Y – Santos rebuff mysterious Bermuda bidder
Santos is reviewing its assets after hacking into costs and spending to adjust to the new climate of oil and gas prices half what they were in mid 2014.
The sharp slump in the oil price hit as Santos completed its heavy spending on its massive $US18 billion ($A25 billion) LNG plant in Queensland, and its share of the PNG LNG plant run by Exxon Mobil (which features Oil Search as a big shareholder and founder). The PNG LNG stake is thought to be worth $7 billion alone, hence the feeling the $6.88 a share is too cheap.
The spending and slide in revenue in profits has left Santos exposed to predators with a weak balance sheet.
