Santos Ltd (ASX:STO) rejects Harbour Energy takeover offer and terminates discussions

The Santos Ltd (ASX: STO) share price will be on watch on Wednesday after the energy producer released an update on the Harbour Energy takeover offer after the market closed on Tuesday.

According to the release, Santos has rejected the US$5.21 per share (A$6.86 per share) takeover offer from Harbour Energy and terminated discussions.

The company’s independent directors and managing director unanimously resolved to reject the proposal on the basis that that it does not represent the full value of the company and is not in the best interests of shareholders.

Santos pointed to the 14% rise in Brent crude oil prices and the 18% average increase in the share prices of ASX-listed energy peers since the receipt of the indicative proposal as part of the reason why it rejected the offer.

Although Harbour Energy did increase its offer for Santos during this time, it was only a 4.6% increase.

In addition to this, management felt the final proposal was a highly leveraged private equity-backed structure that would have required Santos to provide significant support for Harbour’s debt raising and hedge a significant proportion of oil-linked production.

What now?

The Santos board believes it can create superior shareholder value through the execution of its existing strategy.

This strategy has already resulted in a significant improvement in its operating performance over the last two years and means that the company is expected to reach its 2019 net debt target of $2 billion more than a year ahead of schedule.

And finally, management believes its strong balance sheet has put the company in a position to resume its fully franked dividend in the near future.

Should you invest?

If there is a selloff related to the takeover rejection on Wednesday then I would be interested at the right price.

Especially if oil prices stabilise at these levels for the medium term. That should put Santos in a position to generate bumper free cash flows along with its peers Oil Search Limited (ASX: OSH) and Woodside Petroleum Limited (ASX: WPL).

While waiting for Santos to resume its dividend, investors might want to check out this top dividend share which is growing its payout at an impressive rate.

OUR #1 dividend pick to grow your wealth over the new financial year is revealed for FREE here!

Financial year 2018 is here and The Motley Fool’s dividend detective Andrew Page has revealed his must buy dividend share to grow your wealth in 2018.

You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.