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Australia’s oil and gas producer Santos said on Tuesday that it would engage in talks with U.S. Harbour Energy Ltd, after receiving the fourth unsolicited takeover bid from the U.S. firm since August 2017, with the latest bid raising the offer to US$10.4 billion (13.5 billion Australian dollars).
Santos has allowed the U.S. firm to start a due diligence after receiving the offer last week. The indicative offer price is US$4.98 per Santos share, equivalent to A$6.50 Australian dollars, the Australian firm said, noting that this was the fourth unsolicited bid it had received since August 2017. In each of the previous three bids, one in August last year, and two in March this year before the fourth offer, Harbour Energy has increased the indicative per-share offer. With the latest offer, “the Santos board considers that, based on the indicative offer price of A$6.50 per share, it is in the interests of shareholders to engage further with Harbour,” the Australian company said.
“There is no certainty at this time that the Harbour Proposal will result in an offer for Santos that is capable of being considered by shareholders,” Santos said.
If the parties reach a deal, Harbour would get access to low-cost oil and to LNG projects in Australia—enabling it to take advantage of the soaring natural gas demand in Asia. One potential setback for the acquisition could be the political and regulatory risk, as Australia’s energy supply shortage—especially gas—has raised fears that foreign-owned companies could ignore domestic needs to pursue profits overseas.
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“Santos has a leading natural gas business in Australia and interests in three operating LNG projects – two in Australia and one in Papua New Guinea – along with an established operating capability and a proven, experienced management team,” Harbour Energy CEO Linda Z. Cook said.
“Our focus for Santos going forward would be in natural gas and LNG in particular,” Cook said in an interview with Bloomberg on Tuesday.
Analysts see Harbour Energy’s latest sweetened takeover offer as a “knock-out bid”.
“We do see this latest Harbour Energy approach as a knock-out bid, one which the board of Santos will struggle to turn down,” RBC Capital Markets analyst Ben Wilson said in a note to clients, as carried by Bloomberg.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.