May 15, 2018 / 1:16 AM / 10 days ago

Santos suitor Harbour works with target's top shareholders to seal takeover plan

ADELAIDE (Reuters) - Santos Ltd’s suitor Harbour Energy said on Tuesday it is working with its target’s top shareholders, China’s ENN Ecological Holdings and Hony Capital, toward sealing a takeover offer for the Australian gas producer.

A sign for Santos Ltd, Australia's No. 2 independent gas producer, is displayed on the front of the company's office building in the rural township of Gunnedah, located in north-western New South Wales in Australia, March 9, 2018. Picture taken March 9, 2018. REUTERS/David Gray

Harbour, which proposed a $10.4 billion takeover in April, is close to completing a review of Santos’ books ahead of deciding whether to make a binding offer, Santos Chief Executive Kevin Gallagher said on Tuesday.

“There’s been no issues raised,” he told reporters on the sidelines of an oil and gas industry conference, when asked how Harbour’s review was going.

Harbour said on Tuesday it was working with ENN and Hony Capital, which together own 15.1 percent of Santos.

“Harbour is seeking to agree terms with each of ENN and Hony in order to put forward a final proposal for the acquisition of Santos,” the private equity-backed firm said in a statement to the Australian stock exchange.

The statement came after ENN called for a trading halt in its shares for up to 30 days from Tuesday.

ENN said in a statement it had reached a tentative agreement with Harbour to retain an indirect investment in Santos, but the matter was still facing “significant” uncertainties.

Santos, however, said on Tuesday it was unaware of any agreement between ENN and Harbour.

“There’s been no contact between ourselves and ENN on that,” Gallagher told reporters.

The plan for ENN to retain a stake in Santos if Harbour took it over was first outlined in April.

Santos in April opened its books to Harbour after receiving a takeover offer of $4.98 a share from the U.S. company, its fourth unsolicited bid since August 2017.

At today’s exchange rate, that would be worth A$6.61 a share, compared with Santos’ last trade at A$6.23, suggesting investors remain uncertain about a bid going ahead.

If completed, the deal would be the biggest inbound purchase of a listed Australian company since the Unibail-Rodamco’s $16 billion buy-out offer for shopping mall giant Westfield Corp, which just received regulatory approval at end-March.

It would also be the biggest ever takeover of a company in Australia’s oil and gas sector.

Reporting by Sonali Paul in Adelaide and Chris Thomas in Bengaluru; additional reporting by Twinnie Siu in Hong Kong and Ian Ransom in Melbourne; editing by Richard Pullin and Tom Hogue

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