Santos has rejected Harbour Energy's $14 billion bid to buy the company

GLNG project in Queensland. Supplied.
  • Santos rejected the offer last night and terminated discussions.
  • The Santos board said the offer undervalues the company and is overly complex in its structure .

Oil and gas company Santos has rejected a takeover offer by private equity group Harbour Energy.

In a statement lodged on the ASX last night, Santos said the offer “does not represent the full value of the company”. It also terminated all further discussions with Harbour.

The rejection comes after Harbour Energy upped the value of its bid by around 5% to $US5.21 per share earlier this week.

Harbour also clarified that the revised bid was its “best and final” offer. The upgraded offer was conditional on Santos entering into hedging contracts on its oil-linked production.

Santos cited the hedging requirements as one of the risks associated with the bid, along with a complex transaction structure and the fact that Santos would face operating restrictions prior to the bid.

“The Final Proposal was a highly leveraged private equity-backed structure that, prior to implementation, would have required Santos to provide significant support for Harbour’s debt raising and to hedge a significant proportion of oil-linked production,” Santos said.

And in addition to a wait-time pending the approval of the Foreign Investment Review Board, the deal would also place “restrictions on the conduct of Santos’ business from the time of entering into the Scheme Implementation Deed until implementation”.

A successful bid would also have had to gain the approval of at least 75% of Santos shareholders

In rejecting the bid, Santos also said it’s well positioned to benefit from rising oil and gas prices, and is generating strong free cash flow.

The final offer from Harbour Energy “does not represent a full value of the company and, when combined with the associated risks, is not in the best interests of Santos shareholders”, the company said.

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