Santos (ASX:STO) share price down amid concerns over bidding war

Santos and Oil Search could be preparing to battle following Oil Search’s rejection of Santos’ merger proposal.
The post Santos (ASX:STO) share price down amid concerns over bidding war appeared first on The Motley Fool Australia. –

The Santos Ltd (ASX: STO) share price is falling today amid reports experts expect its merger bid for Oil Search Ltd (ASX: OSH) to get messy.

Santos made an under-the-table proposal that would have seen it merge with Oil Search in late June. Santos’ proposal went public on Tuesday when Oil Search rejected the bid.

Right now, the Santos share price $6.64, 1.48% lower than its previous close.

It has also fallen 2.7% this week, despite announcing positive quarterly results yesterday.

The market seemingly expects Santos to increase its bid but some analysts say Oil Search’s board is preparing for battle. Let’s take a closer look.

Is a bidding war brewing?

With oil prices back in focus and its bid for Oil Search rejected, the Santos share price is having a tough week.

Santos’ bid for Oil Search and its following rejection was announced on Tuesday.

The all-scrip offer put forward was 0.589 new Santos shares for every Oil Search share.

Santos’ offer implied a value of $4.25 per share – a 12.3% premium on the Oil Search share price as of 24 June. Oil Search said Santos’ offer undervalued its shares.

The proposal offered Oil Search’s shareholders a 37% holding in the resulting company.

Word on the street today is Santos is preparing to put forward an increased offer, and Oil Search’s board is ready to toss it out.

According to reporting by The Australian, Wood Mackenzie senior analyst Daniel Toleman believes Oil Search’s shares have surpassed the offer’s premium. Toleman was quoted as saying:

The Oil Search board will likely believe that a merger with Santos would not provide full value to Oil Search shareholders. As a result, we expect the board to fight off the merger attempt.

MST Marquee analyst Mark Samter said Oil Search, and its share price, isn’t in a good position to fight off Santos’ proposal:

I do think for Oil Search we need to remember the alternate scenario, where no deal happens, and we are back to a world with no CEO, likely a few less board members and clearly greater challenges on progressing Alaska…

Clearly, as I have discussed before, I think there are far greater opportunities to extract value than the market may realise in this deal, both through asset optimisation in [Papua New Guinea]… and in being willing to sell operator-ship in Alaska.

Santos share price snapshot

Despite this week’s poor performance, the Santos share price is doing well.

It has gained 3.5% year to date. It’s also 19% higher than it was this time last year.

The post Santos (ASX:STO) share price down amid concerns over bidding war 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 May 24th 2021

More reading

Oil Search (ASX:OSH) share price on watch — board tipped to fight merger
5 things to watch on the ASX 200 on Friday

Santos (ASX:STO) share price jumps on record quarterly sales
What’s happening with ASX 200 oil shares this week?

5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. 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!