Socialism restricts Santos growth

IT’S tempting to think it will be different this time for Santos as a fresh takeover bid promises to invigorate an exhausted company, but Slugcatcher and most other observers of the sorry Santos saga suspect that when the dust settled nothing will have changed.
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Slugcatcher

Repeatedly, over more than 40-years, outsiders have tried to acquire control of a business which has deep roots in the history, social life and politics of South Australia, a combination of forces which has proved fatal for every would-be buyer.
 
And in that trifecta of seemingly irrelevant factors can be found the reason why the latest attempted takeover will most likely fail like those before.
 
On one side of the latest Santos situation is what seems to be a pure financial transaction; money on the table from a US mob called Harbour Energy for Santos shares, take it or leave-it.
 
On the other side can be found the vested interests of the Adelaide establishment which have held Santos captive, treating it as either a semi-government department, or a convenient cash-cow to fund worthy local causes.
 
First shots in the defence of Santos by civic leaders have already been fired in Adelaide and while the national interest card has yet to be played that might not be far off.
 
In many ways, what's happening is a dead-ringer re-run of what happened when the late Alan Bond, a WA-based businessman with a dubious reputation, launched the first bid for Santos in the early 1970s, a time of erratic oil price movements and state governments which held corporate power before it was largely transferred to the national government.
 
To ensure that Santos remained embedded in the Adelaide establishment a 15% shareholding limit was placed on the company by the SA government, a move which effectively entrenched management, killed growth and limited investor interest in the company.
 
Convenient as it might be to imagine that such a scenario could not be repeated that is exactly what seems to be happening as the wheels of capitalism v socialism roll around and true believers in socialist ideals return to the top of the political pile.
 
In the case of Santos, the loudest political shots, so far, are being fired by the SA Government's Treasurer, Tom Koutsantonis, who accused Harbour Energy of being driven by "self-interest and greed" - as if that's something new in business.
 
The self-interest and greed comment was followed up with a threat to "do whatever was in his powers" to stop a takeover of Santos.
 
When the Slug saw those remarks, he was stunned to think that in 40 years the world of Santos has not moved beyond what is essentially a squabble over an oil and gas company being treated as some sort of domestic pet controlled by government.
 
Lost in the heated political air around Santos is the financial question of whether Harbour Energy's likely revised offer of $5.30 per share is good or bad, and whether anyone has actually thought of asking the owners of the business, the shareholders.
 
Now, isn't that a radical idea, ask the owners what they would like to do with their company?
 
In time, the only people who really matter in the fate of Santos are its shareholders, but at the moment the issues are all about trying to mix financial engineering with political hyperbole, and that's an awful combination.
 
If any of this was new The Slug might be tempted to take more than a passing interest, perhaps even pointing out that while Santos might have its roots in South Australia the business itself migrated years ago to greener and more profitable pastures.
 
The best bits of Santos today are in Papua New Guinea, Queensland and the Northern Territory. They are no longer in the Cooper Basin of SA, a point which appears to mean nothing to some SA politicians who want to harness the company to the state.
 
Koutsantonis, while he might not have the same powers over corporations as a state government in the 70s, can reintroduce laws to impose a shareholding cap, and has hinted that such a move might be made.
 
How the Santos situation got to the point of it mimicking Groundhog Day, a theatrical event where life repeats every day to the point of driving people mad, is too complex to fully debate here.
 
But it seems likely that the rise of socialist ideals, such as forcing companies to obey the edicts of government, can be traced to excesses in the corporate sector which have given business a bad name, the increasingly widespread rejection of globalisation, and a small-town mentality found in many isolated, low-growth, communities which long for the good old days.
 
In other words, the fate of Santos (as ever) is not a simple financial equation, or a sum-of-the-parts valuation, or a competing round of offers as other potential bidders better what Harbour Energy has to offer.
 
Santos today is all about domestic politics, and the return of socialism as a popular belief to replace unpopular capitalism, and whether anyone can get a business deal to succeed in that climate seems highly unlikely.