Santos rejects $5.15-billion bid from royal asset manager

BEN SHARPLES

ADELAIDE (Bloomberg) -- Santos Ltd., the third-largest oil and gas company in Australia, rejected a A$7.14-billion ($5.15-billion) takeover offer from an advisory firm that manages assets for Middle Eastern and Asian royals as too low and “opportunistic.”

Scepter Partners’ bid of A$6.88 cash a share, priced at 26% more than the close Wednesday, “does not reflect the fair underlying asset value of the company,” Adelaide-based Santos said Thursday in a statement. Santos shares, which lost more than half its market value in the year to Wednesday, surged as much as 21% today, the most since March 1986.

Speculation Santos was a target emerged in August when the company began a review of its options amid a plunge in crude prices and CEO David Knox said he would step down. Santos’s main assets include a 13.5% stake in Exxon Mobil Corp.’s $19-billion LNG venture in Papua New Guinea and the $18.5-billion Gladstone LNG project in Australia.

“Santos is clearly ripe for the picking,” Evan Lucas, a market strategist at IG Ltd. in Melbourne, said by phone. “I don’t think the board will see any price sub-A$10 as fair value considering Gladstone is now up and running.”

Santos, which had net debt of A$7.5 billion at the end of 2014, said in August that various groups had approached the company about its assets and other “strategic opportunities.” The Scepter bid is indicative, highly conditional and non-binding, it said Thursday.

Shares Jump

Shares in Santos advanced as much as A$1.12 to A$6.56 and were at A$6.475 at 10:49 a.m. in Sydney. Brent crude oil, used as a benchmark for energy prices, prices has slumped 43% in the past year.

Rayo Withanage, who co-founded wealth management firm BMB Group Ltd. to invest money from Middle Eastern royals, formed Scepter in May. Scepter, which has offices in New York, London and Beijing, is an investment syndicate led by a group of former executives from Blackstone Group LP’s Asia advisory team including Anthony Steains, according to its website.

The Scepter syndicate investors include Asia and Gulf-based ruling families, ultra-high net worth industrialists and sovereign investors, according to the website. It seeks to buy large, strategic assets in natural resources, infrastructure, real estate, media and telecommunications.

As well as co-investing with the syndicate, the former Blackstone executives operate a merchant banking business to advise and identify opportunities, the website shows. While at Blackstone, the team led by Steains helped advise on Aluminum Corp. of China’s $14-billion purchase of a stake in Rio Tinto Group and a $2-billion coal merger in Australia.