Santos Rejects 26% Premium Take Over Offer

[Tree]

Santos rejects $5.1B sovereign wealth-backed bid

Embattled Australian oil and gas producer Santos said on Thursday it has rejected a A$7.1 billion ($5.1 billion) takeover proposal from a fund backed by the ruling families of Brunei and the United Arab Emirates.

Santos effectively put itself on the block in August, looking to sell assets in a race to cut its A$8.8 billion net debt as its Gladstone liquefied natural gas (LNG) project begins operations amid a sharp slump in oil prices.

It said the bid from Bermuda-headquartered Scepter, pitched at a 26 percent premium to its last trade, was too cheap and included conditions that would hurt Santos' consideration of other alternatives in its asset sale process and a wider strategic review.

"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 to the Australian stock exchange.

Santos shares jumped as much as 20 percent on news of the bid, but are still worth only half as much as a year ago.

Scepter, with offices in New York, London and Beijing, describes itself as a syndicate of ruling families, sovereign wealth funds and ultra-high net worth industrialists who have committed more than $14 billion to back large transactions.

Prince Abdul Ali Yil Kabier, a member of Brunei's ruling royal family, is a founder and director of the firm alongside financiar Rayo Withanage. Other directors include Brunei's Prince Bahar Bin Jefri Bolkiah, the United Arab Emirates' Sheikh Juma al Maktoum, former HSBC chairman John Bond and former U.S. ambassador to Qatar Patrick Theros.

Incorporated this year, the management team is made up of several former directors of Blackstone Advisory Partners in Asia.

Santos' spokesman declined to comment on what other alternatives the company was considering. Santos received the Scepter bid on Oct. 20,

The oil and gas producer has stakes in oil and gas production in Australia, Papua New Guinea, Indonesia and Vietnam, with the jewel in its crown considered to be its 13.5 percent stake in the Papua New Guinea LNG project.

Analysts have said that stake alone could be worth more than A$5 billion, based on the value implied in a recent takeover bid byWoodside Petroleum for Oil Search, a bigger stakeholder in PNG LNG.

[Martinistocks]

Just the beginning of cheap offers for M&A activity. Why pay full price when everything in the oil and gas sector is on sale.

[sageo]

Hmm.....26 % premium . If someone doubled that to 52% for IOC , that would put us at 60 ish . Still not near the true value, but might be a place to start in case anyone wanted to begin some fireworks . Just a thought . Good day to all longs.

[Palm]

And will be through next year at least. Interesting perspective from CEO of Hess who says that there usually is a 2-year process in the down-cycle in oil prices. He feels that we are in year 1 and it will take next year for things to really flush out. They are in places like Baaken and Gulf of Mexico and says that in Baaken they had something like 15 rigs last year and they are down to 7 now and will reduce further yet. Stated this reflects what US producers are doing as capital continues coming out of the fields. Demand is strong and growing. Says it would take $70 oil for Hess and others to feel it is worth going back into shale, etc.

Analysts don't understand the lag parts of gearing down and back up again. Not like these producers will jump back into shale when it hits $50; would be near impossible to do.

[Palm]

This is where I think people are missing possible interest in IOC outside of Total, Woodside, etc. These SWF/National Companies from the ME, Japan, SK, China, etc. can afford to pay up as it gives them equity returns to offset cost of buying LNG and are not constrained by who are driven by ST views.

[Tusker]

So ridicules. Ultra wealthy families, sovereign rulers, industrialist want to pay cash for LNG. PNGLNG is lowest cost producer (Non-NOC) in the nearist proximity to the highest consuming region of LNG.

How amusing.

[jft310]

The swing in payment from Total to Interoil is huge . Asset managers read the research reports and see 6.9 T's numbers and here's Citi at 8 T's . All below GLJ estimates who has been proven nothing but right with its work . So we wait for the final T number which appears to be larger than analyst expectations which bodes well for a nice price POP. What that number will be is a function of how large is the payment , current oil prices and LNG market conditions .

[Palm]

More players in mix for Santos assets:

"Japanese trading and investment house Marubeni Corporation is believed to be seeking a stake in the Santos and Oil Search-backed PNG LNG gas project.

As Santos and its advisers at Deutsche Bank and Lazard juggle a fistful of proposals stemming from the wide-ranging strategic review, Street Talk understands one option under serious consideration for Santos is to sell a 3.6 per cent stake in PNG LNG to Marubeni in a deal that could be worth as much as $2 billion.

Santos has a 13.5 per cent stake in the PNG LNG project, which it owns alongside ExxonMobil (33.2 per cent and operator), Oil Search (29 per cent), National Petroleum Company of PNG (16.8 per cent), JX Nippon Oil and Gas Exploration Company (4.7 per cent) and Mineral Resources Development Company (2.8 per cent).

The asset's strategic value was underscored by Woodside Petroleum's bid for Oil Search in September and Santos executive chairman Peter Coates has already called PNG LNG his company's "jewel in the crown". But Santos' stake would be worth less than Oil Search's because it does not own as much of the gas that would be used for an expansion.

That said, everything is on the table at Santos and there are plenty of balls in the air.

Other sources reckon Santos' preferred deal is the sale of assets in Western Australia and Victoria, along with an equity raising. [Bids for assets were due on October 20, however it's understood they were pushed back by one week.]

However, hiving off a 3.6 per cent stake in PNG LNG could allow Santos to achieve twin goals of paying down debt and maintaining a material interest in the project.

It comes as Santos rejected a $6.88 a share cash proposal from Middle East-backed Scepter Partners, saying it was an "opportunistic" approach.

Scepter's team, headed by former Blackstone Advisory Partners banker Anthony Steains, is understood to have sought meetings with Santos, along with no-talk no-shop conditions and four-to-six weeks due diligence. Highbury Partnership and Gilbert + Tobin are advising the bidder.

Fund managers and analysts were left wondering on Thursday night how Santos could price an equity raising given the 16 per cent share price jump on Thursday and the $6.88 a share line in the sand.

They were also left guessing at the strength of Scepter's bid. It's a new entity and listed equities investors are yet to see exactly how the bidder funds its deals.

There is a theory that Steains and co made the bid without pitching the deal to the underlying equity sponsors [i.e. sovereign wealth funds and Brunei royalty]. It's also understood Scepter needed due diligence to line up debt funding".

Read more: http://www.afr.com/street-talk/marubeni-corp--santos-png-lng-stake-20151022-gkfo85#ixzz3pLOQJrBK 

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[Tusker]

Gosh... "Script" for one and "Cash" for the other.

Interesting times.