Oil Search, Santos in $16 billion merger deal

Papua New Guinea-focused Oil Search has agreed to a new merger proposal by Australia’s Santos, in a deal that would create an LNG player worth about $16 billion.

The move comes just weeks after Oil Search had rejected a proposal from Santos.

As part of the revised offer, Oil Search shareholders would receive 0.6275 new Santos shares.

Following approval of the scheme, Oil Search shareholders would own about 38.5 percent of the merged group and Santos shareholders would own 61.5 percent, according to a joint statement on Monday.

Oil Search has a stake in the ExxonMobil-led PNG LNG project but also the planned Papua LNG development.

The revised merger proposal implies a transaction price of A$4.29 per Oil Search share, based on the closing price of Santos and Oil Search shares on July 19.

Moreover, this represents a 16.8 percent premium to the Oil Search closing price on July 19 and a 16.4 percent premium to the one-month VWAP on that day, the statement said.

“The Board of Oil Search has confirmed that, subject to the completion of confirmatory due diligence and the agreement of a binding merger implementation agreement, their intention is to unanimously recommend the revised merger proposal,” it said.

Top 20 largest global oil and gas firms

The merger of Santos and Oil Search would create a “regional champion of size and scale” with pro-forma market capitalisation of A$21 billion ($16 billion) which would position the merged entity in the top-20 ASX-listed companies and the 20 largest global oil and gas companies, the duo said.

Santos chief executive Kevin Gallagher said the potential merger represents a “compelling combination of two industry leaders to create an unrivalled regional champion of size and scale with a unique diversified portfolio of long-life, low-cost oil and gas assets.”

Also, he said the revised merger proposal represents an “extremely attractive opportunity to deliver compelling value accretion to both Santos and Oil Search shareholders.”

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