Abu Dhabi suitors walks away from $30b Santos bid

Abu Dhabi National Oil Co. has walked away from a proposed $30 billion offer for natural gas producer Santos, saying a “combination of factors” discouraged it from making a final bid.

The shock decision late Wednesday night came just days before a second extended deadline for the Middle East suitors to present a finalised offer was due on Friday.

Santos runs the Darwin LNG plant, Queensland’s Gladstone LNG, and Papua New Guinea LNG offshore. The business also supplies about 16 per cent of WA’s domestic gas through Varanus Island.

Adnoc, which made an initial bid through its XRG unit, announced the deal in June with a consortium that included Abu Dhabi Development Holding Co. and Carlyle Group. It’s been keen to build an international business producing and trading LNG, one of the fastest-growing fossil-fuel markets.

“The XRG-led consortium announced today that it has withdrawn its indicative offer and will not proceed with a binding offer for Santos,” the company said in a statement.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

“Following a comprehensive evaluation, and taking into account all commercial factors and the terms of the scheme implementation agreement required by the Santos board, the consortium has determined that it will not be proceeding with the proposed transaction.”

The consortium said while it was disappointed not to proceed with a binding offer, its engagement with Santos had “reinforced our confidence in Australia’s energy and investment environment, as well as the other locations that Santos operates”.

It also noted it had been prepared to undertake new long-term commitments to Australian energy production “that would deliver meaningful benefits to domestic gas consumers and enhance regional energy security”.

Santos had extended an exclusivity period for a second time last month, saying the consortium had requested more time to complete due diligence and obtain approvals. The board of Australia’s second-largest fossil-fuel producer had already recommended Adnoc’s cash offer of $US5.76 ($8.89) a share.

Just three weeks ago, Santos chief executive Kevin Gallagher said he was confident a deal could be reached, despite regulatory hurdles — including a nod from the Foreign Investment Review Board.

“We’re finalising an acceptable agreement and have made considerable progress,” he told investors when presenting the Adelaide-based company’s half-year results late last month..

“This is a big transaction. I believe it will be the largest all-cash transaction ever on the ASX.”

But there had been resistance to a deal from trade groups. Offshore Alliance, which represents two major labour unions, urged the Federal Government to keep Santos “in Australian hands” and block the sale.

Adnoc and XRG said they were not done seeking deals.

“XRG remains dedicated to pursuing value-accretive opportunities across gas and LNG, chemicals and energy solutions, and has a rich and deep pipeline of investment opportunities,” according to the statement.

The collapse of the deal comes about 20 months after merger talks between Santos and larger rival Woodside ended with no deal being agreed. In 2018, Santos rejected multiple offers from US-based Harbour Energy.

Santos shares closed trade on Wednesday at $7.65.

with Bloomberg