STO $6.86, page-5

From Bridget Carter and Scott Murdoch
Members within the Harbour Energy camp have this week been furiously trying to talk down any suggestions there was any action happening within its quarters. But it appears those close to Harbour could be protesting too much.

The latest reports around the market suggest its bankers at JPMorgan and Highbury Partnership and its legal team remains hard at work on making a sweetened offer for Santos.

One source told DataRoom there had been “huge expectation” within the Adelaide-based company that Harbour was going to return with another offer this week, and the “nothing to see here” rhetoric could be a ploy to drive down the share price and gain back control of the agenda.

The understanding is that Harbour wants to pay about $5.30 a share for the company, but hedge funds are willing to accept only a price of at least $5.60 and institutional investors at least $6.

Its offer in August was worth $9.48 billion or $4.55 a share.

So far, Harbour’s moves to put a floor under the share price have worked: it has fallen since takeover speculation emerged to about $4.90 from $5.15, but last night the shares closed at $4.96.

The jump comes as the oil price remains strong and long-term investors are buying in because they like the company’s fundamentals.

The view is that the share price of Santos will likely find a level around $5 and should Harbour Energy be unable to pay over $5.30 a share, it may be forced to walk away.

If Harbour, which is backed by private equity firm EIG Partners and headed by former Royal Dutch Shell executive director Linda Cook, does return with a bid, it will likely be before Christmas.

Observers say if it is left to the new year, when many key players are away, the bid will lose momentum.