What: The Santos Ltd (ASX: STO) book build for the institutional rights shortfall has reportedly been placed at $4.60 a share. That's a significant premium to the $3.85 mark at which the rights were priced and will no doubt provide the market with some sorely needed confidence.
It should be noted however that the book build price is significantly below the $5.91 at which the stock last traded before entering a trading halt to conduct the institutional portion of the capital raising.
So What: It has been a whirlwind of news over the past few weeks for followers of Santos to digest…
First, there was the news that the board of Santos had rejected an indicative proposal from the mysterious Scepter Partners to acquire all of Santos for a cash consideration of $6.88 per share.
This was followed by the release of details from the oil and gas producer's strategic review which included plans to reduce net debt by $3.5 billion via the $520 million sale of its interest in the Kipper gas field, a $500 million private placement at a 15% premium to an affiliate of private equity firm Hony Capital, and a $2.5 billion fully underwritten accelerated pro-rata renounceable entitlement offer.
Next up was news that Mr Kevin Gallagher, who is currently the CEO of engineering services firm Clough Ltd, has been appointed CEO of Santos and will begin his duties in early 2016.
Now What: Retail investors now get the opportunity to either take up their 1 for 1.7 rights at $3.85 per share or to sell their rights. The strong price received via the institutional portion suggests retail shareholders are in for a much-needed windfall.
A similar case occurred in late October for retail shareholders of Origin Energy Ltd (ASX: ORG). In this instance, Origin's shareholders who did not take up their 4 for 7 pro rata rights to acquire shares at $4 received a premium of $1.35 from the retail book build. That was even better than the premium received in the institutional book build which took place in early October and saw institutional shareholders receive a $1.20 premium.
