Santos Ltd., Adelaide, has rejected the latest conditional, binding takeover offer from Harbour Energy Ltd. (OGJ Online, May 21, 2018).
Harbour confirmed that this week’s proposal of a scheme of arrangement at a cash price of $5.21/share was its best and final offer. It followed a 7-week period of engagement with Santos on the price and terms of an indicative proposal which began with a price of $4.98/share announced Apr. 3.
Santos said last night that the consideration would be in US dollars and Santos shareholders would be subject to fluctuations in the exchange rate, with no adjustment if the US dollar depreciated against the Australian dollar.
Santos added that since the receipt of the indicative proposal, Brent oil prices have increased by 14% and the share prices of other Australian stock exchange peers by an average of 18%.
The company said the Harbour proposal was a highly leveraged private equity-backed structure that, prior to implementation, would have required Santos to provide much support for Harbour’s debt raising and to hedge a large proportion—30%—of oil-linked production.
Santos said after considering these aspects, the company’s independent directors and the managing director and chief executive officer unanimously resolved to reject the final Harbour proposal on the basis that it did not represent a full value of Santos. When combined with the associated risks it would not be in the best interests of Santos shareholders.
The Santos board said it believes superior shareholder value can be realized by executing the company’s existing strategy with Santos expecting to reach its 2019 net debt target of $2 billion (Aus.) more than a year ahead of schedule.
Santos has now terminated all discussions with Harbour.