ceo says not unfair. independent says 77-100, page-3

DJ Santos CEO: Eastern Star Bid Not Unfair To Some Holders

13/10/2011 04:46AM AEST



LONDON (Dow Jones)--Santos Ltd. (STO.AU) Chief Executive David Knox said Wednesday its proposed takeover of Eastern Star Gas Ltd. (ESG.AU) doesn't unfairly prejudice Eastern Star's investors, who would receive Santos shares in return for their equity while fellow shareholder TRUenergy will be paid in cash for its 3.8% stake.

"It's completely immaterial," said Knox, speaking on the sidelines of a conference here.

Last month, independent expert Grant Samuel criticized the aspect of the deal, describing it as "neither fair nor reasonable" that Santos is paying cash to TRUenergy, the Australian unit of CLP Holdings Ltd. (0002.HK). However, Eastern Star said it was still recommending the deal, pointing out the difference in payment to TRUenergy isn't material.

In July, Eastern Star urged shareholders to accept Santos's offer of 0.06803 Santos shares for each of their shares, valuing them at 90 cents at the time.

Santos also agreed to buy TRUenergy's 3.8% interest in Eastern Star for 90 cents a share in cash and sell it 20% of Eastern Star's permits for A$284 million.

Grant Samuel has valued Eastern Star's shares, including allowing for a control premium, at between 77 cents and A$1.00 each.

Due to a number of reasons, including a downturn in global equities markets and the corresponding fall in the Santos share price since the acquisition announcement, the implied value of Santos's share-based offer has fallen below 90 cents per Eastern Star share and less than what TRUenergy will get for its shares in the company, Eastern Star said.

"If our share price on the particular day that it closes is 13 dollars and seven, it makes absolutely not a jot of difference at all. We're at 12.50 today, so I would say it's much more of a technical issue than a real issue," said Knox.

Santos shares ended Wednesday at A$12.49, while Eastern Star shares closed at 85 cents