Adelaide headquartered oil and gas giant Santos has rejected a $7.1 billion “indicative” takeover bid from investment syndicate Scepter Partners.
Santos revealed this morning that it received the “indicative, highly conditional and non-binding proposal” from Scepter on October 20. The bid was to acquire the entire company for $6.88 per share.
The Santos board met yesterday to consider the proposal and had decided to reject it.
“The proposal is considered to be opportunistic in nature and does not reflect the fair underlying asset value of the company,” the company said in a statement.
“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.
“Santos has been advised by Scepter that it is a direct investment business whose stakeholders include a standing syndicate of ruling families, ultra-high-net-worth industrialists and sovereign wealth funds.”
Santos shares jumped this morning in response to news of the bid.
The stock was up $1.00 or 18.3 per cent at $6.44 each, at 10.40 AEDT, after tipping higher than 20 per cent shortly after the open.
The offer is the first firm proposal that Santos has disclosed after it announced a strategic review in August, effectively putting its assets on the block to cut its $8.8 billion net debt pile.
“Their board would want a minimum of $10 a share, based on the net present value of their assets,” IG’s market strategist Evan Lucas told Sky News.
“They won’t get it because the oil price is not conducive to that scenario,” he added.
Global crude oil prices have halved over the past year to below $US50 a barrel, amid rising supplies and lacklustre demand.
Santos has previously stated that all options are on the table to restore value to its shareholders after a horror 12 months in which the plummeting oil price has battered the business.
Santos said today its strategic review, announced in August, was ongoing and it would “continue to consider all proposals which deliver appropriate value and certainty for shareholders”.
The review announcement in August coincided with news that Santos CEO David Knox would leave the role as soon as a successor is appointed.
In the same announcement the company flagged asset sales, revealing it would be talking with parties who had approached it about “various assets and other strategic initiatives”.
Santos’s half-year profit tumbled 82 per cent, with net profit for the six months to June 30 falling to $37 million from $206 million for the prior corresponding period.
Mineral Resources and Energy Minister Tom Koutsantonis said he “noted” the decision of the Santos board to reject the Scepter bid.
“These are tough times for the oil and gas industry,” he said. “But this Government will continue to work with Santos as it conducts a thorough strategic review of all options to restore and maximise its shareholder value.”