What are the chances of a Santos buyout?
The fact that the Santos share price is languishing well below the takeover offer the company announced this week tells you all you need to know about the prospects of this foreign takeover going through – somewhere between slim and none.
On Tuesday morning, the Santos share price actually slipped, down 1.5c to $7.70, well below the $8.89 per share being offered by the Abu Dhabi National Oil Company Consortium and investment group Carlyle (together the XRG Consortium)
If the deal was a goer, there’s an easy 15 per cent windfall gain for any investor sitting there for the taking – more if the bid is increased or a competing, higher bid is offered.
The fact that investors are sitting on the sidelines and failing to jump at this opportunity shows that there’s little faith the offer will get across the line.
And the reasons are all too obvious.
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The deal needs to be signed off by several regulators, including the Foreign Investment Review Board, but can also be vetoed on national interest grounds by Treasurer Jim Chalmers.
The deal can also be effectively blocked at the state level, with Energy and Mining Minister Tom Koutsantonis saying this week that the government had passed legislation requiring its consent for change of ownership of resources licences.
Amid a decade-plus long debate over the future of energy in Australia – where everyone agrees that gas is the crucial transitional fuel as we work towards net zero – the deal presents a fairly easy political choice: block it and stake your claim as a defender of the nation’s sovereign energy interests, or wave it through and cede substantial control of the nation’s energy future to a foreign power.
Frankly, I doubt the deal will even progress to the point where it will need to be blocked.
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The XRG Consortium will at some point – advised no doubt by the nation’s best-remunerated and well-connected lobbying minds – realise that their deal is a dud.
At the federal level, Treasurer Jim Chalmers’ advisers would be cock a hoop at the prospect of being able to cast their boss as the defender of Australia’s long-term energy interests.
And at the state level, while Minister Koutsantonis is a staunch supporter of the resources sector, he’s first and foremost unashamedly all about putting the interests of South Australians first.
This means keeping high-paying jobs here, large company head offices here – and Santos is the largest – and ensuring that companies invest over the long term for the benefit of the state and the nation.
That’s a much simpler task with an Australian-owned and operated Santos, as opposed to one where the decisions are being made by one of the world’s largest – and state-owned – energy companies in the Middle East.
The political optics of the deal are enough to scuttle it. But throw in the reality of Australia’s gas supply crunch and envisioning Treasurer Chalmers signing off on it becomes even more unlikely.
The Australian Energy Market Operator’s Gas Statement of Opportunities report, released in March, forecasts “risks of peak day shortfalls from 2028, and structural supply gaps emerging from 2029 in Southern Australia’’.
In that context, handing over control of the nation’s second-largest energy company to a foreign state-owned entity seems a vanishingly slim possibility.
