STO Details
 
Speculation on takeover offer from Harbour Energy: Santos Ltd.’s (ASX: STO) stock surged 13% on November 16, 2017 on news of receiving the proposal on a takeover offer from a US player in August 2017. However, the group confirmed that the energy player is not currently in discussions with, and has not received a current proposal from Harbour Energy regarding a change of control transaction for Santos. STO’s announcement came as a response to the hyped media speculation. Media also reports that Harbour was preparing a bid of around A$5.30 a share, which was well above analysts’ average price target of A$4.26.
 
In August 2017, STO had received a confidential, non-binding conditional and indicative proposal from Harbour Energy to acquire all the shares in Santos by way of a scheme of arrangement. The indicative price was AUD$4.55 per share. However, the STO’s Board had rejected the approach on the basis that the indicative price was inadequate and the sources of funds were uncertain.
 
With this backdrop, STO stock rose on speculation of another offer which might emerge in some time. Particularly, various companies including some big sharks are interested in STO due to the fact that the gas demand is expected to soar across the globe, and particularly in China. Further, Australia is said to become the largest LNG exporter by 2020 and in such a case, players like STO will gain more traction. At the moment, STO is expected to hold its gas output steady over the next several years, and growth is expected from 2023 at the back of projects in northern Australia and Papua New Guinea. Particularly, PNG is considered the lowest cost source of LNG growth and makes players dealing in the area to be on the hotbed of takeover activities. Meanwhile, STO stock has risen 20.99% in six months as on November 15, 2017. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $ 4.95
 

STO Daily Chart (Source: Thomson Reuters)

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