Scott Murdoch and Emily Chow
4 min read
By Scott Murdoch and Emily Chow
(Reuters) -Australia's second-largest gas producer Santos said on Monday it intended to support an all-cash $18.7 billion takeover bid from an international consortium led by Abu Dhabi's National Oil Company (ADNOC), which wants to grow a global gas business.
Santos shares jumped 11% by the close on Monday, but that was well short of the 28% premium offered against their previous close, which analysts said reflected risks that the deal may not win regulatory approval in Australia.
ADNOC's investment arm XRG with Abu Dhabi Development Holding Company (ADQ) and private equity firm Carlyle proposed to offer $5.76 (A$8.89) per Santos share. The stock last traded at A$7.72.
Taking into account net debt, the deal gives Santos an enterprise value of A$36.4 billion, which would make it the largest all-cash corporate buyout in Australian history, according to FactSet data.
"For ADNOC, this is in line with their aggressive growth plans," said Kaushal Ramesh, vice president, gas and LNG research, at Rystad Energy.
The takeover bid emerged as oil prices reached multi-week highs as Israel and Iran traded air strikes, sparking concerns oil exports from the Middle East could be widely disrupted.
With Santos in its fold, the XRG-led consortium would gain control of two Australian liquefied natural gas operations - Gladstone LNG and Darwin LNG, as well as stakes in PNG LNG and the undeveloped Papua LNG. Santos' interests in Papua New Guinea are considered its most prized assets.
The company is also developing an oil project in Alaska, Pikka, due to start producing in mid-2026.
XRG said in June it aims to build a gas and LNG business with capacity of between 20 million and 25 million metric tons a year by 2035. Santos last year sold 5.08 million tons of LNG, with more than 60% of that from Papua New Guinea.
"What ADNOC really wants is the LNG assets, since they are inside the Asia Pacific basin. Since their plan is to expand in LNG, they will want assets close to where the future of demand lies," Rystad's Ramesh said.
Australian Treasurer Jim Chalmers, who makes the ultimate decision on major takeovers based on advice from the Foreign Investment Review Board, declined to comment on whether he had any concerns about an ADNOC-led takeover of Santos.
"It would be a big decision," he said in an interview with Australian Broadcasting Corp TV.
Santos said the latest offer came after it had rejected two previous proposals made by the consortium in March at $5.04 and $5.42 per share that were not made public.
