https://www.copyright link/content/dam/images/h/1/0/s/4/r/image.related.afrArticleLead.620x350.h112jb.png/1528363042564.jpg
Should Santos sign a deal to acquire Quadrant, it would likely need to fund the acquisition with a large equity raising. Bloomberg
Predator and prey in the same place at the same time and we're told there is nothing going on. Really?
Man of the moment Kevin Gallagher, chief executive of "we are worth more than $17.9 billion" Santos, and his close advisers were spotted walking into Macquarie's Melbourne office at 101 Collins Street on Wednesday.
Also there, according to our spies, were Brookfield Asset Management dealmaker Len Chersky and Macquarie Capital's Rob Dunlop, among a handful of other powerful dealmakers heavily involved in Western Australian gas business Quadrant Energy.
Macquarie and Brookfield are Quadrant Energy's biggest shareholders, and represented on the company's board by Dunlop, Chersky and others.
https://www.copyright link/content/dam/images/h/1/1/4/c/r/image.imgtype.afrArticleInline.620x0.png/1528362998554.png
Santos has long been seen as Quadrant's most likely buyer. The two companies know each other well and share a domestic gas joint venture at Devil Creek in Western Australia.
And now that Santos has comprehensively rejected its own suitor, it is understood to be back thinking about Quadrant.
But apparently Santos' boss and banker were there as part of a two day investor roadshow that covered both Sydney and Melbourne.
A roadshow is understandable, given recent goings-on at the oil and gas company.
https://www.copyright link/content/dam/images/h/1/1/4/c/q/image.imgtype.afrArticleInline.620x0.png/1528362968724.png
But to be in the same place at the same time as bigwigs is certainly a big coincidence.
Buying Quadrant so soon after rejecting Harbour Energy would be a remarkable turn of events for Santos and a huge test of investor faith in Gallagher and his chairman Keith Spence.
A move on Quadrant would likely need Santos to fund the acquisition with a large equity raising.
Back of the envelope calculations from one analyst pegged such an equity offer at about $3 billion.
Santos shares closed at $6 on Thursday, well south of Harbour Energy's offer. Any raising would be expected to be done at at least a 10 per cent discount to its trading price, which means an offer to shareholders in the low $5 a share range.
So its shareholders could go from a $7-odd payday - albeit with a few conditions attached - to tipping in funds at around the $5 mark.
It's one way to very quickly find out what its big investors make of the board's decision to reject Harbour Energy's bid and set out for life on its own.
A Santos spokeswoman declined to comment.
CVN Price at posting:
14.5¢ Sentiment: Buy Disclosure: Held
(20min delay)