Takeover bid coming from Linda cook?

Big American oil prepares to make $11b all-cash takeover offer for Santos

By Matthew Evans AFR. 15 Nov 2017

Big American oil is preparing to make a $11 billion all-cash takeover offer for Santos as the next step in play for regional and global relevance in rapidly reforming liquid natural gas markets.
A consortium of powerful global energy investors, led by a former executive director of Royal Dutch Shell, Linda Cook, is said to have recently approached the Santos board with an invitation to support a scheme takeover of the battle-scarred pioneer of Australian domestic and export gas sector.
The indicative pricing of a pitch that is expected to be ready to re-present to Santos within weeks is circa $5.30 a share, which would represent a 21 per cent premium to Wednesday's closing price of $4.38, but a more modest 11 per cent over the recently achieved year high of $4.78.
That said, given the offer arrives with acceptable certainty and some potential for further discussion over a more appropriate control premium, there remains much to discuss, given that the indicative pricing would represent an 85 per cent hike on the year low of $2.87.

An opening approach to Santos by interests led by the American-born Cook is said to have been made and rejected during the September quarter.
Apparently the Santos board, led by consistently resistant Peter Coates, cited doubts over funding certainty as the biggest flaw in what was one of those classic non-binding, uncertain and conditional introductory approach.
But rejection has not ended the matter for Cook and her associates. We are assured that a much less incomplete and uncertain proposal is in the making, and a fully funded proposal supported by appropriate levels and quality of equity and debt is expected to be presented to Santos as an early Christmas present.
According to sources in European equity markets, Cook proposal is now fully funded from the capital pools of the US, Europe and Asia.
It is worth recalling that back in October 2015, when times were much, much tougher in the oil markets generally and for Santos especially, Coates refused point-blank to engage with a $6.88 a share bid from a company called Scepter Partners, which purported to have links with Dubai and Brunei oil wealth. The Scepter bid valued Santos equity at $7.1 billion.

Instead of selling itself, or pursuing the assets sales that were flagged through the depths of the crisis caused by the concerted arrival of an oil price crisis with the needs of peak funding for the Santos-led Gladstone LNG project, Santos opted to raise new equity and along the way introduced Chinese investors to its register.
China's investment has evolved over time into a 15.1 per cent stake owned by two associated entities, namely ENN and Hony Capital. In June they entered into an odd little "strategic partnership" with Santos that saw Team China get a board seat and Coates earn some confidence over their twinned intentions.
Right through its tentative engagement with its new investors there have been quite justifiable fears that Santos had delivered China Inc with a takeover blocking stake. But the June accord ended that potential.
The agreement forged means that the board is able to exclude the ENN-Hony director from contemplation of third party offers and that board acceptance of a scheme takeover would see acceptance of the proposal by the two Chinese investors.

The only caveats to that are that the big price accepted is more than China Inc's entry price and that the Shanghai-listed ENN secures shareholder approval needed to make a material transaction.
And that, above all else, is why board endorsement sits so critical to the success of Cook's plan.
The latest bid vehicle is planned to be Harbour Energy, a Washington-based energy investment company that is run by Cook. And while Harbour and its impressively starred boss may be unfamiliar names to Australian investment markets, the investors they represent are not.
Harbour was set up by a resources investment house called EIG Global Partners and its best known foray in Australian markets was the intricately structure recapitalisation of Senex.

The arrangement confirmed in February introduced EIG as a senior shareholder with 12.6 per cent of the business while securing a broader funding package worth $54 million and opening access to up to $300 million of future project financing.
This is the sort of thing EIG has made its name doing. It was a source of equity and debt for some of the juniors that became majors in the shale revolution and more recently offered support to Cheniere Energy's market-disrupting US LNG play.
The difference between what EIG does and what Cook Harbour is going to do is that she and her executive will be much more than active investors. They intend to run the things they acquire and the word delivered us from northern hemisphere equity markets, where Cook has been actively assembling support, is that the play for Santos should be received as the birth of "a new powerhouse" in regional and global LNG markets.
To assess the seriousness of Cook's intent you need only look to the $US3.8 billion sale of a suite of mature North Sea oil and gas assets that Shell completed just last week. The buyer of what represented half of Shell's North Sea assets was a company called Chrysaor. It is a privately held resources business that is chaired by Cook and whose board includes EIG's chief executive Blair Thomas. And they now run the biggest independent operator in the North Sea.

Cook retired from the Shell board and executive committee at the relatively tender age of 52 back in 2010, reportedly after Peter Voser won the super-major CEO race. Once rated by Fortune as the 11th most powerful woman in global business, she has a 29-year Shell CV including the running of Shell's global LNG business. She has also busied herself on the board of Boeing, Cargill, Marathon Oil and Bank of New York Mellon.
Now she has eyes for Santos. And you might argue that is pretty flattering really.