Oil Search (ASX:OSH) shareholders give green light for Santos merger

Shareholders in the PNG oil and gas explorer have voted overwhelmingly in favour of a long-running merger deal.

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Shares in oil and gas company Oil Search Ltd (ASX: OSH) are edging higher in early afternoon trading today after shareholders voted in favour of the company’s proposed merger with Santos Ltd (ASX: STO).

Shareholders voted today to decide the company’s fate, amid a long-drawn process that has seen several revised offers along the way.

In the end, Oil Search’s equity holders voted with an overwhelming majority that the merger should go ahead, effectively forming an oil and gas powerhouse in the region. Let’s take a closer look.

Green light granted for merger

On Monday, Oil Search advised that conditions concerning approvals from the PNG Securities Commission were satisfied, allowing progress to the final vote.

Seeking shareholder approval today, the board announced it was intending that all the Oil Search shares held or controlled by them would be cast in favour of the scheme. 

At the meeting, a total of 1,446,111,062 shares represented votes cast by proxy, with more than 95% of these voting in favour of the proposal – well ahead of the required 75%.

The scheme, first announced on 10 September, is still subject to a number of stipulations, including final approval in a second PNG court hearing on Thursday.

If successfully approved, the last day of trading for Oil Search shares will be on Friday 10 December. Trading of “new Santos shares” will commence on Monday 13 December 2021, on a deferred settlement basis.

Oil Search will then become a wholly-owned subsidiary of Santos and be delisted from the PNGX and ASX.

On implementation of the scheme, existing Oil Search Shareholders would own approximately 38.5% of the merged group and existing Santos Shareholders would own the remaining 61.5%.

The effective implantation date will be on 17 December if all goes according to plan. Following this, the new Santos shares will begin trading on 20 December on an ordinary settlement basis.

Speaking on the independent report conducted into the scheme, Oil Search’s chair Rick Lee said:

In its report, the Independent Expert has made an assessment of the underlying value of both 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. 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.

Oil Search share price snapshot

It’s been a bumpy ride for Oil Search shareholders these last 12 months, with their holdings only growing by around 4% in that time.

This year to date, Oil Search lags the benchmark indices and has only gained 7%. In the past month, shares are in the red by more than 6%.

The author has no positions 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.

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