Santos shares have fallen after the oil and gas producer rejected a $US10.9 billion takeover offer from US private equity firm Harbour Energy and terminated their negotiations.
Santos announced late on Tuesday that its board had decided that the Harbour Energy offer did not represent a full value of the company, and when combined with the associated risks was not in the best interests of Santos shareholders.
Harbour Energy first made an offer of $US4.98 per Santos share on April 3, and on Monday raised that value to $US5.21 per share.
The revised proposal indicated the offer price would be further increased to the equivalent of $A7.00 per share if Santos agreed to hedge 30 per cent of its oil-linked production in 2020.
Santos on Tuesday said it had terminated all discussions with Harbour Energy.
"The final proposal was a highly leveraged private equity-backed structure that, prior to implementation, would have required Santos to provide significant support for Harbour's debt raising and to hedge a significant proportion of oil-linked production," Santos said.
Santos shares were down 60 cents, or 9.2 per cent, at $5.85 at 1135 AEST on Wednesday.
The shares were trading at $5.07 before Harbour's offer was announced to the market in April.
Analysts at RBC Capital Markets said the rejection was a shock given there are few other interested parties, and said the onus is now firmly on the Santos board and executives to deliver on their strategy and grow the company.
They said Harbour had gone to "great lengths" to furnish the Santos board with an attractive bid, having upped its offer and put in place bid financing, but said the hope of taking over the company had now been terminated.
"If Harbour does come back to the negotiating table with the Santos board it has a hide not made of leather but made of some sort of titanium/Kevlar weave," RBC Capital said.
"We think Harbour's Santos ambitions are dead."
