Australia's Santos rejects $5.1bn takeover bid

GMT 08:58 2015 Thursday ,22 October

Arab Today, arab today Australia's Santos rejects $5.1bn takeover bid

Gas giant Santos
Sydney - AFP

Embattled Australian oil and gas giant Santos on Thursday rejected an "opportunistic" Aus$7.1 billion (US$5.1 million) takeover bid by investment syndicate Scepter Partners, which manages money for Asian and Gulf-based royals.

Santos has been hit hard by a plunge in crude prices and announced a strategic review to pay down debt in August, slashing capital expenditure, cutting jobs and possibly selling some assets.

But it said it was not interested in the approach from Scepter, which bid Aus$6.88 cash for each Santos share, a 26 percent premium on Wednesday's closing price.

The offer sent Santos stock, which has lost more than half its value over the past year, soaring more than 20 percent in early trade before ending 16.18 percent higher at Aus$6.32.

"The proposal is considered to be opportunistic in nature and does not reflect the fair underlying asset value of the company," Santos said in a statement, revealing the indicative and highly conditional proposal was received Tuesday.

"The proposal was also subject to numerous conditions, some of which would be adverse to Santos' continued evaluation of other alternatives in its current strategic review process."

While Santos has stakes in oil and gas production in several countries, including Indonesia and Vietnam, its main assets include a 13.5 percent of Exxon Mobil's US$19 billion liquefied natural gas venture in Papua New Guinea and the US$18.5 billion Gladstone LNG project in Australia.

"We would certainly expect a sweetened bid. The question is by whom," IG's market strategist Evan Lucas said.

"The board would want a minimum of Aus$10 a share, based on the net present value of their assets, but that is unlikely given the current oil prices."

Global crude oil prices have halved over the past year to below $US50 a barrel, amid rising supplies and lacklustre demand.

The decline has battered energy company shares and raised prospects for a spate of mergers and acquisitions. In September, Papua New Guinea-focused Australian energy producer Oil Search knocked back an Aus$11.6 billion takeover offer from Woodside Petroleum.

The Bermuda-headquartered Scepter is a direct investment business whose stakeholders include a standing syndicate of ruling families, ultra-high-net-worth industrialists and sovereign wealth funds.

Its website lists Prince Abdul Ali Yil Kabier from the Brunei royal family as a founder and director, along with Sheikh Juma Al Maktoum, uncle to the Crown Prince of Dubai.

The syndicate says it represents over US$14 billion in discretionary assets and more than US$100 billion in net worth of core stakeholders.

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