Energy giant Santos has been in talks with ASX-listed rival Oil Search assessing a potential deal to merge into Australia’s biggest oil and gas company and one of the top 20 in the world.
Santos made an unsolicited, confidential merger offer for Oil Search, according to a copy of the proposal dated June 25. Two weeks later, on July 9, Oil Search’s board wrote to Santos acknowledging the strength of a combined company and rationale for the merger, but turned the offer down.
Details of the offer appear to contradict Oil Search chairman Rick Lee’s statement to analysts and investors on Monday that the company had received no takeover approaches.
The proposed all-stock deal, under which Oil Search shareholders would own 37 per cent of the merged entity and Santos shareholders would own 63 per cent, valued Oil Search at a 12 per cent premium of $4.25 a share.
A combined Santos-Oil Search would have a market value of $22 billion, placing it in the ASX top 20, ranking as the biggest oil and gas producer in Australia and among the 20 biggest globally.
Mr Lee made the claim that Oil Search had not received an offer during an investor briefing on Monday following the shock departure of Oil Search managing director Keiran Wulff after just 17 months in the job. The board said his resignation was due to health reasons and whistleblower complaints about his behaviour that were subsequently investigated by the company’s board.
Within 24 hours, Oil Search on Tuesday morning issued a “clarification” to investors over its response to a question during the briefing, and confirmed that it had received a non-binding “change-of-control proposal” which the board had assessed in conjunction with Goldman Sachs, Macquarie Capital and Allens as advisors.
“Following that assessment, the proposal was rejected as it was determined to not be in Oil Search shareholders’ best interests on the terms and value proposed,” the statement said.