Australia's Santos says will engage with Harbour Energy over $10.4 billion bid

SYDNEY (Reuters) - Australian gas producer Santos Ltd (STO.AX) said on Tuesday it had received a new $10.4 billion takeover offer from Harbour Energy, in a cash bid that has piqued the interest of the board.

The offer values Santos at US$4.98 per share, or A$6.50, per share, a 28 percent premium to the company’s last closing share price of A$5.07.

Santos said it was Harbour Energy’s fourth unsolicited bid for the Adelaide-based company, which has stakes in several liquefied natural gas (LNG) projects in a region where gas demand is soaring.

“The Santos board considers that, based on the indicative offer price of A$6.50 per share, it is in the interests of shareholders to engage further with Harbour,” Santos said in a statement to shareholders.

The bid from Washington-based Harbour, a private equity-backed firm led by a former Royal Dutch Shell Plc executive director Linda Cook, consists of $4.70 per share in cash and a special dividend of $0.28 per share.

Harbour plans to fund the takeover through a combination of debt and equity, with J.P. Morgan and Morgan Stanley underwriting $7.75 billion of debt.

“With the support of these providers of capital, Harbour stands ready to move expeditiously towards entering into a Scheme Implementation Agreement and to commencing all necessary government and regulatory review processes,” said Cook, Chief Executive of Harbour Energy.

Santos said last year it had rebuffed a A$9.5 billion takeover approach from Harbour Energy in August, saying it undervalued the company.

Santos also disclosed on Tuesday that Harbour had approached the company on two occasions in March, with bids of A$6.25 per share and A$6.37.

Santos’ Australian and offshore gas assets includes a prized stake in the Papua New Guinea (PNG) LNG project, run by ExxonMobil Corp.

PNG project partners are still assessing damage of a powerful 7.5 magnitude quake that struck Papua New Guinea on Feb. 26, killing dozens of people and halting production at the site.

Santos shares are due to start trading at around 0100 GMT, one hour after the open, the company said.