Santos confirmed yesterday that it had rejected a $9.5 billion takeover offer from a consortium of investors, led by Harbour Energy, because it was inadequate and the funding sources were uncertain.
While Santos insists it is not in current discussions with Harbour Energy, the Australian Financial Review is reporting that the equity group is planning an all-cash bid worth $11 billion that could be put to the Santos board within weeks.
Harbour Energy is an investment vehicle formed by American private equity firm EIG Global Energy Partners, specialising in investing in energy and energy-related infrastructure.
Koutsantonis told InDaily today that while the Government was only monitoring the situation at the moment, it stood ready to act to protect the state’s biggest company from being taken over and broken up.
“If it’s a private equity fund rather than an operator (who seeks to take over Santos), they’re not interested in operating here in South Australia,” he said.
Rather, its plans were likely to be “sacking everyone, selling off the assets and making a profit”.
“They look like raiders rather than operators,” he said.
Koutsantonis said the Government had a number of tools at its disposal to discourage or prevent a takeover of Santos, including its role in providing input to the Foreign Investment Review Board, which would need to approve any takeover.
State Parliament has, in the past, imposed a shareholding cap on Santos. The cap was introduced in 1979 by the Corcoran Labor Government to prevent a takeover of the Cooper Basin by Alan Bond, protecting Santos and the state’s gas supplies.
“Parliament has rights – we don’t usually use them,” Koutsantonis warned.
With the Federal Government attempting to shore up Australia’s domestic gas supplies, Koutsantonis believes it would be “ridiculous” if Prime Minister Malcolm Turnbull allowed a foreign investor to take over and break up such a significant gas player.
Koutsantonis also pointed out that, as Energy and Resources Minister, he is a key partner in a range of licences, tenements and agreements with resources companies that operate or seek to operate in South Australia.
For the moment, though, the Government is keeping a close eye on developments.
“We haven’t formulated a position yet, and Santos haven’t asked us for assistance,” he said. “We are monitoring it.”
Koutsantonis believes that while Santos’s share price is relatively low, its assets are very valuable, and the equity group was looking to take advantage of the Adelaide headquartered company’s recent successful cost-cutting.
InDaily has sought a response from Harbour Energy.
Santos has five key natural gas assets in Papua New Guinea, Queensland, Darwin, Western Australia’s Carnarvon Basin and central Australia’s Cooper Basin.
It made a loss of $US1.1 billion in 2016, as it began work on streamlining its business to focus on those five gas assets, including the divestment of other assets to reduce its debt.
Santos CEO Kevin Gallagher echoed Koutsantonis’s assessment, saying it was no surprise that there was renewed interest in Santos.
“It’s a very positive reflection of our turnaround journey over the last two years and I take it as a compliment,” he said in a statement.
“Our progress over the last two years has exceeded my expectations and Santos is now in a strong position with a great future.
“We’re well-positioned to keep delivering value for our shareholders and there are people out there who are going to want to try to take advantage of our success.”
Despite its recent challenges, primarily plummeting oil prices, Santos remains the most significant South Australian company.
InDaily’s SA Business Index – a yearly ranking of the state’s biggest companies – has always placed Santos in the number one position.
– with AAP
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