- Oil Search said on Monday it intended to recommend an improved buyout offer from Santos, worth 8.4 billion Australian dollars ($6.2 billion), in a deal that would create a top-20 global oil and gas company.
- Santos, Australia's second-largest independent gas producer, hiked its offer by 6.5% to 0.6275 new Santos shares for each Oil Search share from 0.589, which had been rejected in June by the Papua New Guinea-focused oil and gas producer.
Oil Search said on Monday it intended to recommend an improved buyout offer from Santos, worth 8.4 billion Australian dollars ($6.2 billion), in a deal that would create a top-20 global oil and gas company.
Santos, Australia's second-largest independent gas producer, hiked its offer by 6.5% to 0.6275 new Santos shares for each Oil Search share from 0.589, which had been rejected in June by the Papua New Guinea-focused oil and gas producer.
Based on Santos' closing price on Friday, the deal values Oil Search at AU$4.05 a share, a 6% premium Oil Search's close on Friday. Oil Search's shares on Monday traded just below the revised offer, indicating investors back the deal.
"We're happy. We're supportive of the transaction. We think the combined business is definitely better than the individual businesses," said Matthew Haupt, a portfolio manager at Wilson Asset Management, which owns shares in Oil Search and Santos.
Oil Search shareholders would own around 38.5% of the merged group, with Santos shareholders holding around 61.5%, compared with the original offer made in June which would have given Oil Search shareholders a 37% stake in the merged group.
Santos Managing Director Kevin Gallagher said the merger would create "an unrivaled regional champion of size and scale with a unique diversified portfolio of long-life, low-cost oil and gas assets" in Australia, Papua New Guinea (PNG) and Alaska.
The combined group will own a bigger stake than Exxon Mobil in the coveted PNG LNG project, which Wilson's Haupt said Santos might look to sell down to France's TotalEnergies, owner of the Papua LNG project.
Oil Search said subject to each company completing due diligence on the other, the Oil Search board intended to unanimously recommend that shareholders vote in favor of the revised offer in the absence of a superior proposal.
The Santos approach came at a vulnerable time for Oil Search as it is searching for a new chief executive to replace Keiran Wulff, who quit last month following just 17 months in the job due to ill health and a whistleblower complaint.
Santos made an initial approach on June 25, but the proposal was only revealed weeks later after Oil Search Chairman Rick Lee, on a call about Wulff's resignation, told analysts the company had not received any approaches.
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