There’s doubt that the now binding but still conditional $13.7 billion offer for Santos from US group, Harbour Energy, will succeed because the price hasn’t been lifted to reflect the recent rise in world oil price to around $US75 a barrel.
The price of the key Brent global marker crude has risen from around $US69 to more than $US79 a barrel on Thursday and yet Harbour Energy has not changed its indicative price of $US4.98 a share (around $A6.63).
Santos shares traded $US6.20 yesterday – down around 1.9%. That’s investors telling Harbour Energy that their offer is light on and success is uncertain because of the lower than hoped for price.
It is a final, binding offer and if rejected by the Santos board, Harbour can only turn it into a hostile offer, which would be self defeating.
The fall in the value of the Aussie dollar in the past month has added around $A200 million to the value of the offer, and Harbour seems to be hoping that will be enough.
The Harbour Energy offer though has secured the backing of the target’s pair of Chinese shareholders who control 15% together.
To win the bidder needs the approval of the Santos board because of the way the company is structured, with its base in Adelaide and any bid needing state government approval.
A hostile offer for Santos won’t succeed. Harbour’s final, binding offer follows four unsuccessful offers over the past eight months.
Harbour has reportedly been talking to the Chinese shareholders ENN and Hony and on Wednesday they reached preliminary agreement with Harbour on a deal that would allow them to retain exposure to Santos’ assets.
The terms of the offer have changed. The offer will be in cash for all shareholders other than China’s ENN and Hony, with no fixed Australian dollar component.
The proposal now includes an offer for ENN and Hony to roll over their existing Santos shares into any new Harbour investment vehicle, but it is understood this is unlikely to be a one-for-one trade.
