Santos' big day edges closer

Santos' big day edges closer

Meanwhile, China Inc has inadvertently announced that Harbour Energy's due diligence on Santos is over and that the long-flagged bid for South Australia's legacy gas company is now locked and loaded.

First thing yesterday, Santos' biggest individual shareholder, the Shanghai listed ENN Ecologicial Holdings, went into trading halt on its local bourse citing "preliminary agreement" on the share transfer deal that will deliver Harbour upwards of 15 per cent of its Australia target.
ENN owns 10.31 per cent of Santos and it sits in a "strategic relationship" with Santos' original Chinese saviour, private equity firm Hony Partners, which speaks for another 4.8 per cent.
The associated investors have been negotiating with Harbour since April 3 over the terms of an arrangement that will see them flick their combined 15 per cent interest into an unlisted special purpose vehicle that has been created to own those shares.
ENN's notification of a trading suspension that "will not exceed 30 days" noted that management had reached a form of agreement with Harbour on May 14 to make the share exchange.
It is not clear whether discussions with Hony have reached similar preliminary finality, but ENN's announcement confirms that the first great leap on to the Santos register has all but been completed.
The news flow from Shanghai is said to have left Team Harbour both surprised and bemused.
From what we understand, Harbour is seriously close to a stay-or-go decision on its long-flagged bid but that the warning note issued to the market yesterday accurately characterises the weight of doubt over just what its private equity stalker might do.
The Santos statement said in part that the company had "not received a notification of any agreement between Harbour and ENN or any change in the substantial holding in relation to its shares".

There is more to that statement than might appear to the eye.
One of the many consequences of the "strategic relationship" agreement that Santos and its associated Chinese owners forged in June last year is that the oil company is deemed to have a relevant interest in the 15 per cent of its register that is owned by ENN and Hony.
As a result, Santos would need to inform the market if there was any change in the level of ownership that its associates own. Patently then, Santos needs to know whether or not an arrangement that has required ENN's suspension in Shanghai is binding enough to oblige notification to the ASX of a change of a significant shareholding.

• STO