Abu Dhabi state oil firm makes US$18.7 billion bid for Australia’s Santos

SYDNEY, AUSTRALIA: Abu Dhabi’s state-owned oil company is leading an US$18.7 billion takeover bid for Australian energy group Santos as it seeks to build a global natural gas giant, the two firms said Monday.

Santos’ board said it planned to unanimously recommend the Abu Dhabi National Oil Company’s offer to shareholders if it can agree on the takeover terms.

Adelaide-based Santos has operations in Australia, Papua New Guinea, East Timor and the United States, and is a major supplier of liquefied natural gas in Australia and Asia.

The Abu Dhabi National Oil Company offered US$5.76 a share in a bid for all of Santos’ outstanding stock, valuing the entire company at US$18.7 billion.

The price per share is 28 percent higher than Santos’ closing level on Friday.

It was the “final, non-binding” offer from the Middle East oil company, which had offered two, lower confidential bids in March, Santos said.

Santos’ stock was more than 11 percent higher in afternoon trade on the Australian Securities Exchange.

The Abu Dhabi-based, state-owned energy firm made its bid via a consortium led by its own subsidiary, XRG.

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Other members of the consortium include Abu Dhabi Development Holding Company and global investment firm Carlyle.

In a statement, XRG said it aimed to build on Santos’ legacy as a trusted energy producer, “strengthening domestic and international energy security”.

“The proposed transaction is aligned with XRG’s strategy and ambition to build a leading integrated global gas and LNG business,” it said.

Santos’ board said it intended to “unanimously recommend” that shareholders vote in favour of the deal if it can agree on terms and there is no better offer.

Santos said the “indicative proposal” by its Abu Dhabi suitor was subject to due diligence, agreement on terms, and approval by regulatory authorities in Australia, Papua New Guinea and the United States.

Approval by Australia’s foreign investment regulator will be a “major issue”, said Saul Kavonic, head of energy research at MST Marquee.

He expected “strong scrutiny” of the deal given that Santos owns critical gas infrastructure on Australia’s east and west coasts, and the Abu Dhabi National Oil Company’s status as a foreign government-owned entity.

It would be Australian Treasurer Jim Chalmers’ first big decision on a foreign government bidding for major critical infrastructure, Kavonic said.

The government may insist that some of Santos’ domestic gas assets be split off as a condition of a takeover, he said.

The Middle East-led consortium said its offer would leave Santos’ headquarters in Adelaide and vowed to work with existing management to accelerate growth and support local jobs.

The group said it planned to invest in Santos’ gas and liquefied natural gas business to provide “reliable and affordable low carbon solutions to customers in Australia, the Asia Pacific and beyond”.

XRG said it would ensure Santos makes investments in carbon capture and storage projects, low carbon fuels and “other decarbonisation initiatives”.

Santos has been a rumoured takeover target for more than two years, said a report by E&P Financial Group.

The timing now felt “opportune” for a takeover offer, it said, with the risks weighing in favour of higher energy prices and Santos having completed some major investment projects.

Last year, Santos and rival Australian energy firm Woodside Energy abandoned talks to create one of the world’s largest natural gas exporters, after failing to reach a deal.