Oil Search rejected an unsolicited takeover proposal from Santos Ltd valuing the Papua New Guinea-focused oil and gas producer at A$8.8 billion ($6.5 billion), but both companies said on Tuesday they wanted to pursue further talks.
Oil Search said the offer was not in the best interests of shareholders, but its shares rose 8% after both companies said it made sense to create a group that would rival Australia’s top independent gas producer Woodside Petroleum in market value.
“Oil Search agrees with Santos that there is strategic logic in a combination of the two companies,” Oil Search said in a statement, but added that Santos had yet to come back with a fair offer.
The approach comes at a vulnerable time for Oil Search as it is searching for a new chief executive to replace Keiran Wulff, who quit on Monday following just 17 months in the job due to ill health and following a whistleblower complaint. It also just put on hold a final decision on a $3 billion oil project in Alaska.
Santos made the approach on June 25, but the proposal was only revealed on Tuesday after Oil Search Chairman Rick Lee a day earlier, on a call about Wulff’s resignation, told analysts the company had not received any approaches.
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