Why the Santos (ASX:STO) share price is edging lower today

The company's shares are slipping after an update on a proposed merger.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Santos Ltd (ASX: STO) share price is heading south on Monday morning. This comes after the energy giant provided an update on its proposed merger with Oil Search Ltd (ASX: OSH).

At the time of writing, Santos shares are swapping hands for $6.17, down 1.28%.

worker in hard hat at an oil refinery

Image source: Getty Images

What's sending the Santos share price lower?

In today's release, Santos advised it has agreed with Oil Search to extend the due diligence period for another week.

Early last month, Santos increased its offer to acquire Oil Search shares under a revised merger proposal.

The offer put forward for Oil Search shareholders to receive 0.6275 new Santos shares for each Oil Search share held. This is a slight increase from the earlier rejected proposal that presented 0.589 per Santos share for every Oil Search share owned.

As a result, Oil Search shareholders will own roughly 38.5% of the merged group, as opposed to 36.9% in the original offer. Santos shareholders will control the remaining 61.5%.

In monetary terms, the transaction translates to a price of $4.29 for each Oil Search share based on the closing price of Santos and Oil Search shares on July 19 (the day prior to disclosure of the first proposal).

While exclusive mutual due diligence is being conducted, both companies have until 13 September to proceed on the deal.

If successful, the Oil Search board will recommend its shareholders to vote in favour of the revised merger proposal.

Both Santos and Oil Search are pushing to become the ASX's largest oil and gas company and a top 20 global player.

The super-company would effectively hold a diversified portfolio of long-life and low-cost assets with significant growth options.

No doubt this could have a positive effect on the Santos share price in the future.

About the Santos share price

The Santos share price has been moving in circles in 2021, slipping 4% over the last 9 months. While generally flat for the period, when looking from this time last year, the company's shares have gained almost 18%.

On valuation metrics, Santos commands a market capitalisation of roughly $13 billion, with more than 2 billion shares outstanding.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

Share Market News

Testing again

Read more »

Share Market News

Aaron Test 2

Read more »

Share Market News

Aaron Test

Read more »

Share Market News

JP Test

Read more »

Share Market News

JP Test

Read more »

Portrait of Discovery Fund portfolio managers Mark Devcich and Chris Bainbridge
Share Market News

Test

Portfolio managers Mark Devcich (left) and Chris Bainbridge. Image source: Discovery Fund test test

Read more »

a man in a hoodie grins slyly as he sits with his hands poised on a keyboard. He is superimposed with a graphic image of a computer screen asking for a password, suggesting he is a hacker.
Share Market News

Another ASX 200 company has been hit with a cyber incident. Here's what we know

Hackers have breached the systems of this ASX 200 company.

Read more »

a woman
Broker Notes

5 ASX 200 shares that inflation can't touch: expert

Regardless of whether you're a bull or a bear, cost pressures are a factor when buying stocks at the moment.

Read more »