By Robb M. Stewart

MELBOURNE, Australia--Private-equity firm Harbour Energy Ltd. has launched a fresh US$10.37 billion takeover bid for Santos Ltd. (STO.AU), which it plans to grow through investment in its existing assets and by snapping up further natural-gas assets in Australia and internationally.

The proposed deal is the fourth offer Harbour has made since August to grab Santos, which owns vast oil-and-gas acreage in Australia and is a partner in liquefied natural gas ventures stretching from Australia's far north to Papua New Guinea.

Harbour--formed by EIG Global Energy Partners to buy controlling or near-controlling stakes in energy assets globally--said Tuesday it was offering US$4.98 a share for Santos, a 28% premium to the last closing price for the shares before the Easter long weekend in Australia.

The proposal tops earlier offers beginning last year and as recent as two days before the most recent bid was received by Santos just ahead of Easter, the Australian company said. Santos said it had entered a confidentiality agreement with Harbour to allow its suitor to go through its books, and that a board committee had been set up to consider the approach.

Linda Cook, chief executive of Harbour, said Santos has a leading natural-gas business in Australia and interests in three operating LNG projects, two in Australia and one in Papua New Guinea, as well as an experienced management team.

Harbour's aim would be to use Santos's core assets as a platform for growth in Australia and throughout Asia, it said. Its strategy doesn't rely on job cuts and the energy investor said it has no plans to relocate Santos's headquarters from Adelaide.

The bid would comprise cash and a special dividend of US$0.28 a share, although the U.S. energy investor said it also would offer an option for Santos's shareholders to accept unlisted shares in a new private company, up to a maximum 20% stake. The offer of stock is aimed in part at Chinese natural-gas distributor ENN Group Co. and private-equity firm Hony Capital, which last year raised their stake in Santos to a collective 15.1% and agreed to act in concert as investors when it came to voting and other decisions.

Harbour's interest comes as the rebound in oil prices and a strong outlook for natural-gas demand across the Asia-Pacific region has encouraged companies to scout for deals in Australia. In recent months, Woodside Petroleum Ltd. (WPL.AU) agreed to buy out Exxon Mobil Corp. (XOM) from a jointly owned undeveloped natural-gas field off Australia's west coast, Japan's Mitsui & Co. (8031.TO) topped offers from two other companies to secure an agreed deal to buy oil-and-gas producer AWE (AWE.AU) for about US$460 million, and smaller Australian producer Beach Energy Ltd. (BPT.AU) finalized a US$1.59 billion acquisition of a basket of oil-and-gas assets from Origin Energy Ltd. (ORG.AU).

In late 2015, Santos rejected as too low a A$7.14 billion approach from Scepter Partners, a Bermuda-based private-equity firm backed by sovereign investors and wealthy members of Asian and Gulf-based ruling families. Since then, under industry veteran Kevin Gallagher who took over as chief executive and managing director in early 2016, the company has tied Santos's future to the GLNG gas-export operation in east Australia that counts Total SA (TOT) among its partners, the Exxon Mobil Corp.-led (XOM) PNG LNG operation in Papua New Guinea, the Darwin LNG project in northern Australia and assets including in the Cooper Basin straddling South Australia and Queensland states.

In February, Santos continued to hold off paying a dividend but raised the prospect of returning capital to shareholders if it could hit a debt-cutting target ahead of schedule. It narrowed its loss in 2017 to US$360 million and slashed net debt by another 22% to US$2.73 billion, on track to reducing it to US$2 billion in net debt by the end of 2019.

Harbour is managed by EIG, which has invested more than US$25 billion in about 320 companies in a portfolio across 36 countries. Late last year, Harbour closed a US$3 billion acquisition of a package of Royal Dutch Shell PLC's (RDSB) producing oil-and-gas assets in the U.K. North Sea.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

April 02, 2018 20:23 ET (00:23 GMT)

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