Harbour Energy Ltd chief executive officer Linda Cook said she would seek to expand Santos Ltd in Asia and Africa after making a A$13.5 billion (US$10.3 billion) offer for Australia’s third-largest energy producer.
US-based Harbour would look to grow Santos’ gas assets in South Australia’s Cooper Basin, the ConocoPhillips-operated Darwin liquefied natural gas (LNG) plant in the Northern Territory and in Papua New Guinea, Cook said in a telephone interview yesterday.
The Adelaide-based company granted Harbour due diligence after receiving the indicative proposal worth A$6.50 per share on Thursday last week, it said in a statement yesterday.
Santos shares jumped as much as 22 percent to A$6.20 and traded at A$5.905 at 3:29pm. The company’s US$800 million 2027 bonds were set for the biggest gain since the notes were sold in September last year.
“Our focus areas would be in Asia and Africa in particular,” Cook said when asked about Harbour’s plans for Santos. “We are big believers in the liquefied natural gas story. Our focus for Santos going forward would be in natural gas and LNG in particular.”
Santos would continue to focus on its existing assets, including stakes in the Gladstone liquefied natural gas plant in Queensland, the Darwin LNG facility and a holding in Exxon Mobil Corp’s Papua New Guinea LNG project, chief executive officer Kevin Gallagher said.
“Santos’ strategy before anybody is taking us over is very much focused on Australia and Asia. There is no Africa,” Gallagher said in a telephone interview. “If Harbour Energy is focused on Africa, that’s really their strategy.”
An alliance Santos entered last year with its top investors, China’s ENN Energy Holdings Ltd (新奧能源) and Hony Capital (弘毅投資), to coordinate investment in LNG production in Australia and Papua New Guinea would not be affected by the offer, he said.
The A$6.50 per share proposal followed offers of A$6.37 on Tuesday last week and A$6.25 on March 22, Santos said in the statement.
“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 LLC analyst Ben Wilson wrote in a note. “The additional measures taken by Harbour to accommodate ENN/Hony and fulsome indications of bid financing offer further evidence of intent from the bidder.”
Harbour’s a joint venture led by resources investment house EIG Global Partners.
In November last year, Santos said it rejected Harbour’s A$4.55 per share non-binding proposal made in August last year due to an “inadequate” price and uncertain funding.
Harbour said the latest offer would be funded by US$7.75 billion of debt to be underwritten by JPMorgan Chase & Co and Morgan Stanley, with the balance in equity from Harbour, other EIG-managed funds and global trader Mercuria Global Energy.
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