|
Oil patch insider: Santos gets $18.7B cash offer from ADNOC to grow global gas biz
Kay Cashman Petroleum News
Santos Limited, led by chief executive Kevin Gallagher, said on June 16 that it received a non-binding indicative proposal from a consortium led by XRG P.J.S.C., a subsidiary of Abu Dhabi National Oil Co., or ADNOC, which is looking to grow a global gas business. ADNOC, through its investment arm XRG, with Abu Dhabi Development Holding Co. and U.S.-based private-equity firm Carlyle, made the US$18.7 billion proposal for the acquisition of all of the ordinary shares on issue in Santos. The cash offer of US$5.76 per share, represented a 28% premium to the Australian company's close on June 13.
The Santos board confirmed that, subject to reaching agreement on acceptable terms of a binding scheme implementation agreement, or SIA, it "intends to unanimously recommend that Santos shareholders vote in favor of the potential transaction, in the absence of a superior proposal and subject to an independent expert concluding, and continuing to conclude, that the potential transaction is fair and reasonable and in the best interests of Santos shareholders."
The offer was preceded by two confidential, non-binding and indicative proposals from the XRG Consortium to acquire all of Santos' shares on March 21 for US$5.04 in cash per share and on March 28, for US$5.42 cash per share.
Golden parachute "Credit to Gallagher for extracting such a premium offer -- he will have earned the payout of his ensuing incentives in doing so," Saul Kavonic, an energy analyst at MST Marquee, said in a note. "Gallagher has found his escape parachute and it's made of gold."
The proposal is subject to the satisfactory completion of confirmatory due diligence by the XRG Consortium and the negotiation and execution of an SIA with Santos on customary terms and conditions, Santos said in its June 16 release.
Goldman Sachs and JB North & Co are acting as financial advisers to Santos; Rothschild & Co. is acting as independent board adviser. Herbert Smith Freehills Kramer is acting as legal adviser to Santos.
Implementation of the scheme under the SIA would be conditional on (among other things) customary approval from the Foreign Investment Review Board, Australian Securities and Investments Commission, National Offshore Petroleum Titles Administrator, PNG Securities Commission, PNG Independent Consumer and Competition Commission and Committee on Foreign Investment in the United States.
Due diligence access After "careful consideration" of the indicative proposal (including consultation with its financial and legal advisers), the Santos board has determined that it is in the best interests of Santos shareholders to provide the XRG Consortium with access to confidential information to conduct confirmatory due diligence and negotiate the terms and conditions of an SIA, subject to reaching agreement with the XRG Consortium on the terms on which access to due diligence will be provided, Santos said.
"The XRG Consortium has indicated that it requires Santos to enter into a Process and Exclusivity Deed (to include, among other things, exclusivity restrictions) before it progresses to undertaking confirmatory due diligence and negotiating the terms of the SIA. Santos intends to negotiate the terms of the Process and Exclusivity Deed and an associated Confidentiality Deed with the XRG Consortium," Santos said.
Santos shareholders do not need to take any action in relation to the indicative proposal. Santos notes that there is no certainty that the XRG Consortium will enter into a binding SIA or that a potential transaction will proceed.
Santos will continue to keep its shareholders informed in accordance with its continuous disclosure obligations, the company said.
What's being said According to The Sydney Morning Herald, XRG said it would "maintain Santos' brand, keep its headquarters in Adelaide, and its operational footprint in Australia and key international hubs."
A deal that results in Middle Eastern interests controlling Santos' key gas assets would be a headache for Jim Chalmers, Treasurer of Australia under Prime Minister Anthony Albanese, Kavonic was quoted as saying in a news report.
"This may be Chalmers' first big decision on a foreign government bidding for major critical infrastructure," he said.
Although Chalmers will have the final say on any deal, it must also gain approval from Australia's Foreign Investment Review Board, or FIRB.
In an ABC news report on June 16, Chalmers said he welcomed a range of opinions on the indicative proposal but said he wasn't able to comment on it as a potential decision maker: "It would be a big decision. I do intend to take the FIRB advice seriously and I don't intend to pre-empt that advice."
Alaska oil assets Since Santos is operator and part owner of the Pikka oil development project west of the central North Slope in Alaska, as well as a partner with Bill Armstrong's Lagniappe and Apache Corp. on the big eastern North Slope oil discovery at Sockeye, the state of Alaska and the Trump administration might also be weighing in on the XRG Consortium's potential takeover of Santos.
Stay tuned....
--Oil Patch Insider is written by Kay Cashman
| 