Santos shares slide after multibillion-dollar takeover abandoned

ADNOC’s foreign investment arm XRG alongside Abu Dhabi sovereign fund ADQ and private equity firm Carlyle, will not make a binding offer for Santos, XRG said in a statement, capping a months-long takeover saga.

“The XRG-led consortium announced today that it has withdrawn its indicative offer and will not proceed with a binding offer for Santos,” the company said in a statement.

“While the consortium maintains a positive view of the Santos business, a combination of factors, when considered collectively, have impacted the consortium’s assessment of its indicative offer.”

“While disappointed not to move forward, XRG, and its consortium partners, are responsible, disciplined investors with a clear focus on creating value for our shareholders and driving long-term growth.

“The consortium extends its appreciation to the Santos management team for their assistance in the process, as well as all levels of government and other stakeholders for their positive and constructive engagement. This reinforced our confidence in Australia’s energy and investment environment, as well as the other locations that Santos operates.”

Speaking to InDaily, Energy & Mining Minister Tom Koutsantonis said: “nothing surprises me about the oil and gas industry”.

“These deals aren’t done until they’re done,” he said.

“As far as the government’s concerned, whether we’re happy or unpleased, we would have made requirements on the sale that would have left South Australia first and foremost no worse off.

“Am I glad Santos continues? Yes I am. If we had extracted concessions out of XRG that would have made a better proposition for us I would have been pleased too. But our focus has always been South Australian headquarters, South Australian jobs.”

He said his guess was that “this isn’t over”.

“I don’t think this is the final offer that Santos will receive, and I think more will come,” he said.

“It’s in that sweet spot where their developments haven’t quite started producing to the point where they’re too big to take over.

“Someone will attempt again, and we’ll go back to this process, back to the drawing board again, to make sure that South Australia gets a good outcome.”

The Minister wouldn’t be drawn on what “requirements on the sale” the state government would’ve imposed: “it’s not in the state’s advantage to have that publicly ventilated amongst any potential buyers”.

“But the broad details are: Cooper Basin is a strategic asset in South Australia, Moomba is a very important asset. The state needs gas for our gas fire turbines and our industry, and we need gas most importantly to decarbonise.

“Gas is a cornerstone of our economic policy. Whoever looks at Santos…we’ll push very hard to make sure that we’ve got gas coming out of the ground to grow our economy.”

South Australian Premier Peter Malinauskas said today that the news meant Santos would “remain firmly a top 10 publicly-listed company on the ASX based here in Adelaide”.

“Santos is a company that largely is performing well, and I think it remaining in the same hands as it currently is is not a bad thing. It gives us the opportunity to keep working with Santos on some really important challenges,” he told ABC Radio.

“With a company the size and scope that Santos has… there won’t be a week that goes by without a challenge… but XRG was looking at Santos for a reason. XRG put on the table an offer above and beyond the market price for Santos stocks for a reason. It’s because they saw potential value.

“When it comes to the due diligence and negotiation process of what would have been the largest takeover of any company in the history of the Australian Stock Exchange, you’d better believe that there’s a lot of details that need to be worked through, and for whatever reason those negotiations have fallen short.”

Santos said last month that there was no certainty the talks would result in a binding takeover agreement for what would be the largest all-cash takeover in Australian history.

In August, Santos extended its exclusivity period with the consortium twice so it could complete due diligence.

The most recent extension was on 25 August, which came alongside the group’s half-year profits of more than half-a-billion dollars.

The extension gave the consortium until mid-September to decide on the $36 billion acquisition.

Today’s news also means Treasurer Jim Chalmers and the Foreign Investment Review Board would no longer have to face a difficult decision about approving the sale – having to balance Australia’s stated desire to attract foreign investment with the need to protect national interests.

The collapse of the deal comes about 20 months after merger talks between Santos and larger rival Woodside ended with no deal being agreed.