Santos and Oil Search have struck an agreement to merge their businesses through an all-scrip deal worth $21 billion.
Santos and Oil Search have struck an agreement to merge their businesses through an all-scrip deal worth $21 billion.
Under the terms, Oil Search shareholders will receive 0.6275 new Santos shares for every share they hold in the Papua New Guinea-focused business and will own about 38.5 per cent of the merged group.
Adelaide’s Santos – which has operations in WA’s Carnarvon Basin – will own about 61.5 per cent.
Managing director and chief executive Kevin Gallagher will lead the combined group.
“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,” he said in an ASX announcement today.
Santos expects the merger to unlock pre-tax synergies of between $US90 million and $US115 million a year, excluding integration and other one-off costs.
Chairman Keith Spence told the market the merged group would 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 deal is subject to a number of conditions including approval from both Oil Search shareholders and the PNG government.
The board will seek shareholder approval at a meeting on November 29.
Chairman Richard Lee said the merged group could deliver on a pipeline of organic growth opportunities.
“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,” he said.
Acting chief executive Peter Fredricson agreed the merger was expected to bring significant benefits for shareholders.
The deal is set to be completed in December.
Oil Search was trading 3.3 per cent higher at 12pm AEST to $3.77. Santos’ shares were up 1 per cent to $6.09.
