Why the Oil Search (ASX:OSH) share price is roaring 5% higher today

Santos shareholders will be jumping for joy.

| More on:
Woman jumping for joy at great news with wide open country around her.

Image source: Getty Images

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 Oil Search Ltd (ASX: OSH) share price is starting the week off with a bang today. This comes after the oil and gas company received a revised takeover bid by fellow energy producer Santos Ltd (ASX: STO).

At the time of writing, Oil Search shares are exchanging hands for $4.02, up 5.51%.

Oil Search receives higher offer

Following the company's latest update to the ASX, investors are fighting to get hold of Oil Search shares.

According to the release, Oil Search advised it has received an improved non-binding indicative merger proposal from Santos.

Under the new offer, Santos put forward a deal to acquire all of Oil Search's shares. The transaction implies a consideration of 0.6275 new Santos shares for every Oil Search share held.

This is superior to last month's proposal, in which Oil Search was offered 0.589 of Santos shares for each Oil Search share owned. The Oil Search board unanimously rejected this.

Under the revised bid, Oil Search shareholders would hold an approximate 38.5% stake of the merged group. Santos shareholders will retain the remaining 61.5% interest.

The renewed proposal translates a transaction price of $4.52 per Oil Search share. This is based on the closing price of Santos shares on 24 June (the day before submission of the first proposal). Compared to that date, a 19.7% premium applies to the last closing price of Oil Search shares.

What's next for the agreement to proceed?

Both parties will conduct due diligence on each other, subject to a confidentiality agreement. This will enable Oil Search and Santos to do their research and ensure the proposed merger is feasible. This process will take around four weeks to complete.

If this is successful, the Oil Search board recommends its shareholders to vote in favour of the revised proposal. It notes that the merged group will become the ASX's largest oil and gas company and top 20 global player. In essence, this would give the super-company a diversified portfolio of long-life and low-cost assets with significant growth options.

Oil Search share price snapshot

Over the last 12 months, Oil Search shares have accelerated to post a gain of almost 38%. Year to date, however, the company's share price is tracking just 8% higher.

Oil Search presides a market capitalisation of roughly $7.92 billion.

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 Mergers & Acquisitions

Group of people in a gym high five each other surrounded by gym equipment.
Mergers & Acquisitions

This ASX tech stock is hitting a record high on acquisition news

The market is responding positively to this news. Let's dig deeper into it.

Read more »

Two people shaking hands in the boardroom on a merger.
Mergers & Acquisitions

What did Macquarie make of the Brickworks and Soul Patts merger?

Macquarie sees simplification, scale, and upside… but it also has a warning..

Read more »

A cool young man walking in a laneway holding a takeaway coffee in one hand and his phone in the other reacts with surprise as he reads the latest news on his mobile phone
Mergers & Acquisitions

PointsBet share price surges 11% on improved takeover offer

The bidding war for PointsBet shares continues apace today.

Read more »

A couple sit in front of a laptop reading ASX shares news articles and learning about ASX 200 bargain buys
Share Gainers

Why are Soul Patts shares up 9% today?

A marriage proposal has seen investors flock to this company.

Read more »

A young woman holds her hand to her mouth in surprise as she reads something on her laptop.
Mergers & Acquisitions

Why are Brickworks shares up 18% today?

Let's find out what is getting investors excited this morning.

Read more »

Two hands being shaken symbolising a deal.
Mergers & Acquisitions

Soul Patts to merge with Brickworks shares: What does this mean for investors?

These two blue chips are merging as part of a $14 billion deal.

Read more »

The last piece of the jigsaw being fitted, indicating good news for a share price on merger or acquisition
Mergers & Acquisitions

WiseTech share price storms higher on $3.25b blockbuster acquisition

What is the company spending billions on? Let's find out.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Mergers & Acquisitions

IAG share price lifts off on strategic alliance approval

IAG shares are racing higher in Thursday’s sinking market.

Read more »