ADNOC-led consortium pulls $18.7-B bid for Australia's Santos
- ADNOC-led consortium walks away after months of talks
- Third failed takeover attempt for Australian gas firm
- Deal would have been Australia's biggest all-cash buyout
Abu Dhabi National Oil Co. (ADNOC) has withdrawn the $18.7-B offer it led to buy Australian gas producer Santos after months of disagreement over valuation.
The move may slow down ADNOC's aggressive overseas expansion as the firm looks to invest its booming domestic oil income. It also highlights the difficulties foreign firms face when trying to buy assets in Australia. ADNOC's overseas unit XRG's bid with Abu Dhabi sovereign fund ADQ and private equity firm Carlyle for Santos became a third failed bid to buy Santos.
Santos previously rejected a $10.8-B offer from private equity-backed Harbour Energy in 2018 and walked away from talks with its bigger Australian rival Woodside Energy last year to create a possible A$80-B oil and gas giant.
"The market will ask questions about Santos' valuation after this... XRG was a less price sensitive buyer than most yet still couldn't make it work," said MST Marquee senior energy analyst Saul Kavonic.
Neither Santos nor the Australian government immediately responded to requests for comment outside of business hours.
XRG and partners focused on shareholder value. "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 statement, released after Australian financial markets closed, said.
Santos' shares closed on Wednesday at A$7.65, well below the consortium's indicative $5.76 per share offer, which had equated to A$8.89 per share when the bid arrived in June.
The shares have consistently traded below the offer price, which analysts interpreted as a sign from investors that the deal was at risk of not proceeding.
Santos in June said the 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.
Considering net debt, the deal would have given Santos an enterprise value of A$36.4 B ($24.30 B), which would have made it the largest all-cash corporate buyout in Australian history, according to FactSet data.
The consortium had extended its due diligence on Santos and had up until Friday to finalize a formal offer.
Opportunities to sell down some assets. "Despite this outcome, we believe Santos' APAC-facing LNG assets continue to hold geostrategic value in this turbulent time," Kaushal Ramesh, vice president, gas and LNG research at Rystad Energy, said.
MST Marquee's Kavonic echoed that. "There should still be an opportunity for Santos to sell down some assets to realize value and fund more growth to deliver for shareholders, but it’s unclear of this can happen under the current leadership," Kavonic said.
He added there would still be scope for ADNOC to pursue simpler and less controversial asset-level deals.
"ADNOC ambitions haven't changed. Santos just won't be their big LNG debut."
($1 = 1.4981 Australian dollars)
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