Harbour hikes Santos takeover bid. Inserts hedging conditions

Australian oil & gas producer Santos has received an increased takeover bid from Harbour Energy, however with some conditions.

Santos on Monday said that the new offer to by the company by way of a scheme of arrangement is for consideration of US$5.21 per share (equivalent to A$6.95 per share based on an exchange rate of 0.75). According to Reuters, the offer places Santos’ value at $10.8 billion.

As previously reported, Harbour last week sent a binding, conditional proposal from Harbour Energy to acquire 100% of Santos shares by way of a scheme of arrangement for a consideration equivalent to US$4.98 per share.  More on that here.

As for the new, increased offer, Santos said the offer was conditional on Santos undertaking additional hedging of oil-linked production in 2018 of c.30% and changes to hedging in 2019.

In addition, Harbour has indicated the offer price would be increased to a US dollar amount equivalent to A$7.00 per share if Santos agrees to hedge 30% of oil-linked production in 2020.

According to Santos, the Revised Harbour Proposal is subject to conditions, including completion of final confirmatory due diligence and entry into a scheme implementation deed between Santos and Harbour, which requires the transaction to be recommended by the independent directors of the Santos Board and includes, among other things, FIRB and shareholder approval conditions.

Santos said that its independent directors of Santos will consider the Revised Harbour Proposal and will update shareholders accordingly, advising its shareholders to take no action in relation to the Revised Harbour Proposal at this time.

Harbour has said that its strategy for Santos is to “utilize the Company’s core assets and organizational capabilities as a platform for growth in Australia, throughout Asia, and with respect to the global LNG sector.”

In support of this strategy, Harbour has said it expects to invest further in Santos’ existing assets and to pursue the acquisition of additional natural gas and LNG-focused assets in Australia and internationally.