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Published: Thu, October 22, 2015
Economy | By Melissa Porter

Australia's Santos rejects $5.1 bn takeover bid

Australia's Santos rejects $5.1 bn takeover bid

Santos revealed this morning that it received the "indicative, highly conditional and non-binding proposal" from Scepter on October 20.

At 10.15am (AEST) Santos shares were up 16.5 percent $6.34 against a slight 0.18 per cent fall in the broader market.

If you strip out the outliers the average valuation of brokers is $9.36 a share or 70 per cent premium to the last traded price.

It said the bid from Bermuda-headquartered Scepter, pitched at a 26 percent premium to its close on Wednesday, was too cheap and included conditions that would hurt its consideration of asset sales and a wider strategic review. In an official statement from Santos, the firm described the proposal as "opportunistic"; it said that the offer fails to reflect the fair and underlying value of Santos.

Santos reported a net profit of $37 million at 30 June.

Scepter Partners is closely linked to the Brunei Royal Family, which has world class investments in LNG, and shares numerous same Asian LNG customers as Santos.

Shares in Santos advanced as much as A$1.12 to A$6.56 and were at A$6.475 at 10:49 a.m. in Sydney.

Scepter is a direct investment business controlled by a syndicate of ruling families, ultra-high-net-worth industrialists and sovereign wealth funds, according to Santos. 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 US ambassador to Qatar Patrick Theros.

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

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

The company is continuing a strategic review to restore and maximise shareholder value. Its 13.5 per cent stake in the Papua New Guinea LNG project would solve its gearing problem in one hit if offloaded, in fact.

If shareholders don't force a capitulation, Santos should be able to continue assessing asset-sale options while leaving the door ajar for Scepter's return.

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