An American private equity firm has offered to buy South Australian oil and gas giant Santos for a massive $13.5 billion.
In an “unsolicited” offer announced on Tuesday, US firm Harbour Energy offered to buy the company – which gets most of its revenue from natural gas projects in Australia and Papua New Guinea – for $6.50 per share.
That was a 28 per cent mark up on the market price when the offer was announced.
If accepted, the deal would provide a major windfall for Santos’ mainly Australian investors, which include most super funds and, by default, most Australians with super.
That might be a particularly welcome bonus given Santos hasn’t paid a dividend for two years, and has lost half of its value since 2014.
The deal would see Santos – one of the 50 biggest companies listed on the ASX – removed from the share market, and fall into the hands of private, predominantly US investors.
Harbour Energy is itself a subsidiary of a US company called EIG Global Energy Partners, which invests money on behalf of institutional investors such as pension funds.
More than 50 per cent of its investors are US-based, with 28 per cent based in Europe and just 2 per cent in Australia.
That would mean Santos would go from being majority Australian-owned to just 2 per cent Australian-owned.
Currently the offer is far from a done deal. Harbour Energy must carry out its due diligence before formally making the offer. Assuming shareholders vote in favour of selling, the acquisition will need to be approved by the Foreign Investment Review Board.
However, in a statement on Tuesday, the Santos board was positive about the deal.
“The Santos Board considers that, based on the indicative offer price of $6.50 per share, it is in the interests of shareholders to engage further with Harbour,” the statement read.
Accordingly, Harbour has entered into a confidentiality agreement with Santos to allow Harbour the opportunity to undertake confirmatory due diligence.”
The Santos board added, though, that there was “no certainty” the deal would go ahead.
Santos may be an all-Australian company, but its contribution to the country has been weak in recent years.
As well as paying out no dividends in the last two years, it has paid no company tax or royalties, and has slashed its workforce by more than a third, from 3636 in 2014 to 2080 in 2017.
Robert Blair Thomas, chairman of Harbour and chief executive of EIG, said: “Global energy markets are changing rapidly as we move to a lower carbon energy mix and we believe natural gas is one of the primary sources of energy for the future.
“Harbour has a vision to be a leading global player in natural gas and LNG and the action we are announcing today is an important step in realising that vision. If successful, we and our investors will be focused on further growth.”