Santos: OSL rejects merger

OIL Search has rejected a proposal by Santos for a possible merger of the two companies, according to Santos.
In a market release yesterday, Santos, on June 25, submitted a confidential, non-binding indicative all-scrip merger proposal to the Oil Search board.
“The merger proposal provides that the transaction would be implemented through a scheme of arrangement under which Oil Search shareholders would receive 0.589 new Santos shares for each Oil Search share held,” a statement from Santos said.
“Following approval of the scheme, Oil Search shareholders would own 37 per cent of the merged group and Santos shareholders would own 63 per cent.
“On July 9, 2021, Santos received a letter from Oil Search which acknowledged the strengths of the combined company and the rationale for the merger proposal but noted that the proposal did not offer appropriate value for Oil Search shareholders or a basis on which discussions could be progressed.”
Santos said it sought to engage the Oil Search board on the transaction rationale and the opportunity for Oil Search shareholders to participate in the value created by the merger. The potential merger has the following features:

• PRO-forma market capitalisation of AU$22 bil (K55.5bil) which positions the merged entity in the top-20 ASX (Australian Securities Exchange)-listed companies and the 20 largest global oil and gas companies;
•  DIVESIFIED portfolio of high quality, long-life assets in Australia and PNG;
• ROBUST balance sheet with strong liquidity that could self-fund growth options and an investment grade credit rating;
•  LARGER portfolio of development assets and opportunities for optimisation;
•  Strong environmental, social, and corporate governance credentials providing greater access to debt and equity capital; and,
• OPPORTUNITY to create value on day one from substantial combination synergies and expected re-rating in share prices.
  Oil Search portfolio comprises:
•  29 per cent interest in the US$19bil (K65bil) PNGLNG project;
•  operate oil and gas assets which contribute 20 per cent of PNGLNG and produce all of PNG’s oil;
• A 51 per cent interest in Alaska oil assets which are the largest recent US onshore oil discovery; and,
• 22.8 per cent interest in Papua LNG.