The blockbuster $30 billion takeover of Australian oil giant Santos (ASX:STO) is dead in the water after the Abu Dhabi-led consortium driving the offer withdrew its offer late on Wednesday over “a combination of factors.”
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The Abu Dhabi National Oil Company’s investment arm, XRG, had been leading negotiations and made the call to pull out earlier this week.
XRG had originally submitted a non-binding bid in mid-June, then asked for several extensions as it got paperwork together. The group had been required to submit a binding proposal on Friday if interested.
Instead – the deal’s all done and dusted, with Abu Dhabi and XRG walking away.
The consortium “notified the Santos board yesterday evening,” the Oz company confirmed. “The XRG consortium would not agree to acceptable terms which protected the value of the potential transaction for Santos shareholders.”
For XRG’s part, the reasoning was “a combination of factors, when considered collectively, [had] impacted the consortium’s assessment of its indicative offer.” All very vague, with careful tact to not point out specific issues.
Santos was firmer on its side. “The XRG consortium confirmed it maintains a positive view of the Santos business and has respect for the management team.”
The company also confirmed it had been willing to proceed with the $30B bid.
(If the deal had gone through, it would have been the biggest cash-only deal in Oz history.)
What this does do is save the Australian government from taking action; the Minister for Energy and Mining, Tom Koutsantonis, previously threatened to step in.
“Obviously, through the due diligence process, the proponents weren’t happy with what they found and what they discovered,” the mining minister said today. “Or, were trying to extract more value… than shareholders were willing to give.. Whatever the disagreement is, it’s occurred, and we move on.”
With this deal shelved, questions will turn to whether other suitors come out of the woodwork to woo Santos. Mr Koutsantonis seems to think so. “Santos is internationally renowned as a good asset,” he said.
Santos has oil and gas assets spread across South Australia, Queensland, and through Western Australia and Papua New Guinea. The blue-chip gas company makes up to $5.9B each financial year in revenue turnover.
The Oz company has most recently been focusing on developing two major projects, the Barossa gas project Down Under and the Pikka phase one oil project in Alaska. De-risking has been the key focus there.
STO heads into Thursday trade selling at $7.65/sh.
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