09/10/2021 | Press release | Distributed by Public on 09/09/2021 19:04
Santos Limited ('Santos') and Oil Search Limited ('Oil Search') are pleased to announce that they have entered into a Merger Implementation Deed ('MID'), under which the two companies will combine via an Oil Search Scheme of Arrangement ('the Merger'). This follows both companies successfully completing reciprocal confirmatory due diligence, which commenced on 6 August 2021.
Under the terms of the Merger, Oil Search shareholders will receive 0.6275 new Santos shares for each Oil Search share held on the record date of the Scheme of Arrangement (as per merger terms agreed and released to the ASX on 2 August 2021). Upon implementation of the Merger, Oil Search shareholders will own approximately 38.5 per cent of the merged entity and Santos shareholders will own approximately 61.5 per cent.
The Oil Search Board of Directors unanimously recommends that Oil Search shareholders vote in favour of the Merger and each Oil Search Director intends to vote all the shares they hold or control in Oil Search in favour of the Merger (in the absence of a superior proposal and subject to an Independent Expert concluding that the Merger is in the best interests of the Oil Search shareholders).
The combination of Santos and Oil Search will create a regional champion of size and scale with the following features:
Oil Search Chairman Rick Lee said: 'Put simply, this merger provides Oil Search shareholders with a compelling opportunity to participate in a larger entity with significant scale, product mix, ESG and geographic diversity, and access to capital. The combined entity will have the capacity to deliver on an exciting pipeline of organic growth opportunities.'
Santos Chairman Keith Spence said: 'The merger represents an attractive combination of two industry leaders to create a regional champion of quality, size and scale with a unique and diversified portfolio of long-life, low-cost oil and gas assets.
'The merged entity will be well positioned for success in the new era of oil and gas, with strong cashflow generation from a diverse range of assets providing a platform to self-fund growth and deliver shareholder returns.
'We look forward to integrating our businesses to create one high performing team - with a vision of becoming a global leader in the energy transition,' Mr Spence said.
Oil Search Acting Chief Executive Officer Peter Fredricson said: 'We see significant benefits for our shareholders in this merger, not least in the access that Santos brings to a broader range of more liquid global debt capital markets to fund growth projects.'
The combined Santos and Oil Search will be led by Santos Managing Director and Chief Executive Officer Kevin Gallagher, who said: 'Santos and Oil Search will be stronger together and will have increased scale and capacity to drive a combined disciplined, low-cost operating model and unrivaled growth opportunities over the next decade.
'The merger will create a company with a balance sheet and strong cashflows necessary to successfully navigate the transition to a lower carbon future with the combination of Santos' leading CCS capability combining with Oil Search's ESG programs in PNG and Alaska to provide a strong foundation,' Mr Gallagher said.
Following the completion of the Merger, three non-executive directors from Oil Search will join the Santos Board. Santos' head office will remain in Adelaide.
Santos and Oil Search have entered into the attached MID which contains the terms upon which Santos and Oil Search will implement the Merger. Key conditions of the Merger include:
The MID includes reciprocal exclusivity arrangements (including 'no shop', 'no talk' and 'no due diligence' restrictions (each subject to a fiduciary out) and notification obligations), matching rights for Santos on market standard terms and reciprocal break fees.
Full details of the terms and conditions of the Merger are set out in the MID, a copy of which is set out in Annexure A.
Timetable and Next Steps
A scheme booklet containing information in relation to the Merger, including the reasons for the Oil Search Board's unanimous recommendation, an Independent Expert Report and details of the Merger is expected to be circulated to all Oil Search shareholders in October 2021.
Citigroup and JB North & Co are acting as financial advisers and Herbert Smith Freehills and Dentons are acting as legal advisers to Santos.
Goldman Sachs and Macquarie Capital are acting as financial advisers; Rothschild & Co are acting as board adviser and Allens are acting as legal adviser to Oil Search.
1 Based on market data as at 30 July 2021.
2 Based on the midpoint of each company's 2021 production guidance.
3 2P reserves and 2C resources as at 31 December 2020.
4 Based on Santos and Oil Search balance sheet data as at 30 June 2021.