bridesmaid stares down perenial tag

The author of the report, "Santos CEO: Eastern Star Bid Not Unfair To Some Holders" obligingly left his calling card.

So I put it to him he might like to cover the story as it unfolds.

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Dear Alexis,

Thank you to you and Ross Kelly for your article, dated October 12, 2011 13:46 ET (17:46 GMT).

It is with concern that I read only passing reference to the very real hurdles Santos faces in getting its offer to Eastern Star Gas (ASX:ESG) Shareholders across the line, or in fact through the courts, as THAT is the way the companies have chosen to go, via a court approved Scheme of Arrangement (SoA).

However, in all likelihood you reported what you were given to understand by Mr Knox.

If this is a story you would like to follow as it unfolds, there are some further insights which will help you form a balanced understanding of the progress of this takeover bid and why the Santos CEO has felt the strong need to speak at THIS moment, so close to the closing date for voting.

His urgency is equally matched by the apparent anxiety of the ESG Board of Directors, whose Chairman the Hon. John Anderson has this week released an unusual second plea to shareholders to simply cast a vote, in the hope it may see their recommended acceptance of the Santos scrip offer succeed.

That TRU Energy, the .90cents CASH recipient of the offer is being afforded advantaged treatment compared to the vast majority of long term ESG shareholders, who in this volatile market cannot say WHAT they expect to receive under THEIR scrip offer, is as Mr Knox says just a technical issue to cast aside as an annoyance.

Indeed several weeks ago, as that vast majority was beginning to make themselves heard, they were dismissed in the media by their OWN ESG Board as "a noisy minority".

Today, out of such small insignificance there has welled, (or flared, in industry terminology), a focussed, skilled and well resourced Shareholder Action Group (ESGSAG), whose members have had their determination interrupted only by worried calls from ESG, Santos and a caller claiming to be from the investment bank J.P. Morgan.

But what is it about the offer that Mr Knox mightn't have told you? What sparks the resolve of this Action Group, many of whom were strangers, now united in seeking just recompense for their investment?

Bringing the gases of the Gunnedah region to readiness for Santos to pipe to Australian domestic households and clean burning industry, as well as likely overseas export in the form of LNG, has been a long haul for this group.

Santos, having previously made an opportunistic bid for Queensland Gas Co (QGC), only to be trounced by British Gas, (who WERE prepared to pay shareholders a fair price for their resource), saw the value in ESG early. In 2009, desperate not to become a perennial bridesmaid, Mr Knox's company invested half a billion dollars, taking a 19.9% stake of ESG.

Now with additional reserves proven, more wells drilled and pilots flowing freely, the next reserves increase will indicate continued solid growth of this outstanding, world class resource* (D.Knox circa 2011).

Few ESG shareholders are not prepared to sell their shares to Santos, for cash AND at a just price. But any offer to take over their company must be done legitimately. After considerable research, and legal consultation, shareholders are in little doubt that the current Santos offer is in breach of Australian Corporate Regulations governing Takeovers, and in particular by a Scheme of Approval.

And as this is the crux of the matter, acknowledged by the Independent Expert as you reported, it is surprising to hear Mr Knox gloss over an issue that may have marked legal ramifications for the transaction.

Many ESG shareholders have formally registered their rejection of the Santos offer already, by voting NO to the two resolutions via an online facility provided under the scheme.

Within the week, ESGSAG will have mailed thousands more shareholders on the register to inform them of their rights under the current situation. This has required personal funding and enormous time and coordination on the part of the ESG Shareholder Action Group.

A copy of this letter is expected to be displayed on the website of the Australian Shareholder's Association. It may also appear in some form in major Australian daily newspapers.

Of course, if you were interested in a scoop of sorts, it might help to contact the Shareholder's Association, though I cannot say if they will release you any details.

The coordinators of the ESGSAG (which I am not one), may or may not be available for comment, however I may be able to put you in touch if you are interested.

In closing, I would add that in an attempt to obviate unnecessary delays to both Santos shareholders as well as ESG, a representative of the Action Group was scheduled to meet Mr Knox last Wednesday. Mr Knox cancelled the meeting late, citing personal reasons.

Maybe that's how you managed to score YOUR interview with him?

Thankyou for your time today. I wish you well in continuing to report the case if you so decide, and trust to YOUR fairness in the process.

Kind regards,

XXX XXXXX
PO Box XXX, etc etc - Australia
Ph XX XXXXXXXX Mob XXX XXX XXXX