Ann: Santos rejects Harbour proposal and terminates discussions, page-35

AFR on auto pilot?!

Spotlight on Santos kingmakers, at home and abroad
It's day 51 in Harbour Energy's now $17.9 billion pursuit of Santos and attention has turned to the kingmakers: Santos' big investors.

Rightly or wrongly, Santos' board has shown it does not want to accept or reject Harbour Energy's almost-binding proposal without asking its biggest shareholders.

It's a fact that Santos' two largest investors support the bid. They are already in the Harbour Energy camp.

From there Santos' register is dominated by passive funds including BlackRock and Vanguard, and about 35 per cent of the register is believed to be in the hands of retail investors.

But between the passive funds and the retail investors are a bunch of institutions who are long and don't want to be wrong. They're the ones Santos is believed to have been targeting in recent days, following Harbour Energy's "best and final" offer.

The list includes local heavyweight Ausbil, whose Ausbil Australian Active Equity Fund had 5.49 per cent of its money in Santos as at April 30, and even more in its Ausbil Australian Concentrated Equity Fund. [Santos accounted for only 0.66 per cent of the index at April 30].

Fellow Sydney fundie Paradice Investment Management had a similar 5 per cent plus position in its large cap fund as at April 30.

Then there are hedge funds that have bought into the M&A situation both after it first broke in November and since Harbour Energy got into Santos' dataroom last month. Trading desks reckon the fast money funds include Hong Kong's Athos Capital and ARCM and, given their modus operandi, we reckon they would be requesting Santos to hit the bid.

Santos is expected to formalise its view before the end of the week. The board, chaired by Keith Spence, is advised by Rothschild, JB North & Co, Deutsche Bank and Herbert Smith Freehills.