Santos (ASX:STO) share price dips despite progress on $21 billion merger

The proposed merger would create an ASX 200 energy giant
The post Santos (ASX:STO) share price dips despite progress on $21 billion merger appeared first on The Motley Fool Australia. –

The Santos Ltd (ASX: STO) share price is struggling today. Shares in the S&P/ASX 200 Index (ASX: XJO) energy company are down 1% in afternoon trade to $6.82 per share.

This comes amid steady crude oil prices (Brent crude is at US$82.32 per barrel, up 10 US cents overnight). And the Santos share price is slipping despite its mega-merger with fellow ASX 200 energy share Oil Search Ltd (ASX: OSH) edging another step closer.

Santos share price in red

Investors aren’t bidding up the Santos share price today despite news that the 4 major proxy advisers now recommend Oil Search shareholders vote in favour of the merger at the extraordinary shareholders meeting on 7 December.

According to the Australian Financial Review, “CGI Glass Lewis has joined Institutional Shareholder Services (ISS), Ownership Matters and the Australian Council of Superannuation Investors in advising Oil Search shareholders to back the deal…”

For the merger to go through on 10 December, as both the Santos and Oil Search boards hope, 75% of shareholders will need to back the deal. The merger also faces a final hurdle from Papua New Guinea’s National Court, which is expected to make its final determination on 9 December.

What are the reservations about the merger?

As the Motley Fool reported on 11 November, independent expert Grant Samuel reached the conclusion that the merger “is in the best interests of Oil Search shareholders in the absence of a superior proposal”.

The Santos share price dropped 2% on the day.

The report, based on Samuel’s findings, did note the following reservation:

Oil Search shareholders should note that, in its report, the independent expert has made an assessment of the underlying value of each of Oil Search and Santos and, on the basis of its view of those relative underlying values, has suggested that Oil Search shareholders are contributing a greater proportion to the underlying value of the merged group than the 38.5% which they will receive under the terms of the merger.

The report went on to state that:

However, the independent expert also notes the strategic, commercial and funding benefits of the merger, and has ultimately concluded that Oil Search shareholders are likely to be better off if the merger proceeds than if it does not.

This same reservation is what led ISS to qualify its own positive recommendation. Noting there were no superior offers at hand, ISS said (quoted by the AFR):

The qualification is to highlight concerns that a key reason provided in the scheme booklet for voting against the transactions is that OSH shareholders may take the view that the merger ratio implied by the scheme consideration does not reflect the underlying value of the contribution of OSH to the merged group.

Santos share price snapshot

The Santos share price is up 6% in 2021, trailing the 11% year-to-date gains posted by the ASX 200 during this same period.

Over the past month, Santos shares have lost around 6%.

The post Santos (ASX:STO) share price dips despite progress on $21 billion merger appeared first on The Motley Fool Australia.

Should you invest $1,000 in Santos right now?

Before you consider Santos, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Santos wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

5 things to watch on the ASX 200 on Thursday

Biden taps oil reserve. What could this mean for ASX oil shares?

Here’s why the Oil Search (ASX:OSH) share price is slipping today

Why is the Santos (ASX:STO) share price falling on Monday?

5 things to watch on the ASX 200 on Monday

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!