Santos Ltd (ASX: STO) announced this morning to the ASX that it has received a takeover offer from Harbour Energy.

Santos is one of the largest oil & gas producers in the Asia-Pacific region and is among the 50 largest businesses in the ASX 200.

Santos said that on 29 March 2018 it received an unsolicited, non-binding, indicative and conditional proposal from Harbour Energy to acquire 100% of Santos’ shares through a scheme of arrangement. Essentially, there is no certainty that a takeover will definitely occur.

The indicative offer price is US$4.98. In Australian dollars, this is around $6.50 using an exchange rate of 76.62 US cents.

The Harbour offer of $6.50 is a 28% premium to the last closing Santos price of $5.07 on 29 March 2018. The offer price of $6.50 is also a 30% premium to the last month’s average of Santos’ share price of $5.00.

Santos said the takeover offer comprises two elements. The first part is a cash offer price of US$4.70 per share, which is $6.13 in Australian dollar terms. The second part is a special dividend of US$0.28 per share, which is $0.37 in Australian dollar terms and is expected to be fully franked.

The Santos ASX announcement said that shareholders who could benefit from franking credits meant that the special dividend could provide a benefit of up to $0.16 per share.

Harbour Energy is also offering a fixed Australian dollar price for the first 10,000 shares held by each investor. This price would be fixed at the exchange rate at the time the binding transaction documents are entered into.

Harbour Energy said it will fund this transaction through US$7.75 billion of debt.

It’s worth remembering that Harbour has previously offered $4.55, $6.25 and $6.37 to acquire Santos.

Finally, the Santos Board said that, based on an offer price of $6.50, it is in the interests of shareholders to engage further with Harbour. However, directors have advised that Santos shareholders do nothing.

Harbour has entered into a confidentiality agreement with Santos to carry out its due diligence, which means having a detailed look at its records and accounts.

Some of the conditions for the takeover to proceed include the due diligence process, regulatory approval and the unanimous recommendation of the Harbour proposal by the Santos Board.

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