Page 14 - AsianOil Week 29 2021

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Oil Search rebuffs Santos’ merger offer

PROJECTS & PAPUA New Guinea (PNG) focused developer briefing on July 19 that his company had not
COMPANIES Oil Search has rebuffed a merger offer from Aus- been approached by prospective suitors. Within
tralian independent Santos, noting the proposal a day of Lee’s announcement, Santos released
did not reflect fair value for its shareholders. documents relating to its offer.
Oil Search said on July 20 that based upon
its closing share price as of July 16, Santos’ bid Fallout
represented a premium of only 6.8%, despite the The managing director of major Oil Search
latter owning 70% more equity than current Oil shareholder Allan Gray Australia, Simon
Search shareholders. Mawhinney, said the discrepancy had
The non-binding, all-scrip merger proposal, rocked investor confidence in the develop-
which was submitted on June 25, would have er’s board.
seen Oil Search shareholders receive 0.589 new “It’s not that the answers were ambiguous,
Santos shares for each Oil Search share held. The they were blatantly and factually inaccurate,”
deal would have given Santos a 63% interest in Mawhinney told the Sydney Morning Herald
the merged company, while Oil Search would (SMH). “In any event, it is not acceptable for
have held 37%. boards to be anything but transparent.”
While Oil Search acknowledged the “strategic Credit Suisse, meanwhile, has dubbed the
logic” in a tie-up between the two companies, it said judgement of Oil Search’s board as “seriously
it was holding out for a better offer from Santos. compromised”.
The developer noted: “Oil Search has com- “This leaves us uncertain regarding the qual-
municated to Santos that it is open to receiving ity of Oil Search’s guidance and forecasts and,
a revised proposal which more appropriately more generally, uncertain if the board will pri-
reflects the value which Oil Search would bring oritise shareholder value,” analyst Saul Kavonic
to any combined entity. At this stage no such pro- told the daily.
posal has been forthcoming.” Others have taken a sterner stance, describ-
Santos, however, said it believed its offer rep- ing how the situation around the proposal had
resented an “extremely attractive opportunity to unfolded as disastrous. MST Marquee analyst
deliver compelling value accretion” to both com- Mark Samter told the SMH that Santos’s pro-
panies’ shareholders. posal could create a “truly globally significant
The company noted that the ownership ratio and quality portfolio”.
implied a transaction price of AUD4.25 per Oil “As an Oil Search shareholder there is no way
Search share, based upon its own closing price I could listen to yesterday’s debacle, or see this
on June 24, which represented a 12.3% premium morning’s release, and feel any confidence that
to Oil Search’s closing price on that date. my capital is being well-stewarded,” he said.
Santos described the potential merger as a Samter sang the praises of Santos managing
“logical combination of two industry leaders director and CEO Kevin Gallagher, noting that
to create an unrivalled regional champion of as it stood there were “no better hands” to take
size and scale”. It noted that the merged unit control of Oil Search’s assets.
would have a market capitalisation of AUD22bn Indeed, Santos just posted a record quar-
($16.2bn), positioning it amongst the world’s 20 terly revenue figure of $1.1bn for the April-June
largest oil and gas companies. period, bringing its first-half sales to $2.04bn.
The news of the proposed merger has caused It remains to be seen whether Santos will
some controversy, given that it came after Oil present a revised bid or will Oil Search revise its
Search chairman Rick Lee told an investor position and accept the original offer.™

P14 www. NEWSBASE .com Week 29 22•July•2021