A man looks the board of the Australian Securities Exchange ASX in central Sydney August 7, 2013.
A man looks the board of the Australian Securities Exchange in central Sydney August 7, 2013. Reuters/Daniel Munoz

Australian oil and gas producer Santos has rejected a $5.15 billion all-cash takeover offer made by investment firm Scepter Partners, which is backed by members of the ruling families in Brunei and the United Arab Emirates.

In a statement, Santos described the bid as “opportunistic” and not reflecting the “fair underlying asset value of the company.”

“The Santos board has met to consider the proposal and decided to reject it,” Adelaide-based Santos said.

Scepter had offered to pay $6.88, a 26 percent premium on the closing price of Oct.21, to acquire the entire stock of Santos, reports New York Times.

According to some market analysts, Scepter’s bid was an effort to pre-empt a planned asset and share sale by Santos, for 3 billion dollars. The company is reportedly in contact with a number of potential bidders, who are looking at its assets, and are conducting due diligence.

Santos owns natural gas fields in Australia, Indonesia and Vietnam, and also has stakes in a liquefied natural gas project in Papua New Guinea. It runs an LNG plant in the Australian city of Darwin with one more LNG project slated to come up in the eastern city of Gladstone.

Scepter is headquartered in Bermuda and has offices in New York, London and Beijing. According to its website, the firm is “not restrained by traditional private equity models where there is a need for a more stringent time frame on exit and commercialisation.”

The investment firm is headed by Rayo Withanage, a lawyer trained in New Zealand, who founded the investment firm in 2015. He has the backing of BMB that is advising Brunei’s royal family and other clients. With billions of dollars as assets, Scepter acts as a merchant bank as well as direct investment syndicate.

Scepter’s directors include Princes Abdul Ali Yil Kabier and Bahar Bolkiah, members of Brunei’s ruling family; Sheikh Juma al Maktoum, a member of the ruling family of the United Arab Emirates; Sir John R. H. Bond, a former chairman of HSBC; and Patrick Theros, a former United States ambassador to Qatar.

Energy price problem

Santos, as a major investor has high exposure in huge LNG projects in Darwin, PNG and Gladstone. But oil price crash has it hard and there are tough times for it with many of its projects running in full steam.

According to ABC News, Santos shareholders were the worst hit. Its shares plummeted from over $15 to $4.19 earlier in October.

In August, CEO David Knox offered to quit and the board chairman Peter Coates is doing a far reaching review of all assets. Chances are that the deep-pocketed Scepter may improve its offer and the Santos board may be tempted to take a re-look.

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