ADNOC leads $18.7 billion proposal to buy Australia’s Santos in LNG push

By Scott Murdoch and Emily Chow

(Reuters) -Australia’s second-largest gas producer Santos said on Monday it intended to support an all-cash $18.7 billion takeover bid from an international consortium led by Abu Dhabi’s National Oil Company (ADNOC), which wants to grow a global gas business.

ADNOC, through its investment arm XRG, with Abu Dhabi Development Holding Company (ADQ) and private equity firm Carlyle has offered $5.76 (A$8.89) per Santos share, which was a 28% premium to the Australian company’s close on Friday.

Taking into account net debt, the deal gives Santos an enterprise value of A$36.4 billion, which would make it the largest all-cash corporate buyout in Australian history, according to FactSet data.

It would be the third largest takeover ever in Australia, the data showed.

“For ADNOC, this is in line with their aggressive growth plans,” said Kaushal Ramesh, vice president, gas and LNG research, at Rystad Energy.

Santos shares rose 15% in early trading Monday to A$7.86, well below the offer price for the transaction, before tracking back to A$7.81 mid-session.

Analysts said the stock was trading below the offer price as the deal risked not being approved by regulators in both Australia and Papua New Guinea.

The takeover bid emerged as oil prices reached multi-week highs as Israel and Iran traded air strikes, sparking concerns oil exports from the Middle East could be widely disrupted.

With Santos in its fold, the XRG-led consortium would gain control of two Australian liquefied natural gas operations – Gladstone LNG on the east coast and Darwin LNG in the north, as well as stakes in PNG LNG and the undeveloped Papua LNG. Santos’ interests in Papua New Guinea are considered its most prized assets.

The company is also developing an oil project in Alaska, Pikka, due to start producing in mid-2026.

XRG said in June it aims to build a gas and LNG business with capacity of between 20 million and 25 million metric tons a year by 2035. Santos last year sold 5.08 million tons of LNG, with more than 60% of that from Papua New Guinea.

“What ADNOC really wants is the LNG assets, since they are inside the Asia Pacific basin. Since their plan is to expand in LNG, they will want assets close to where the future of demand lies,” Rystad’s Ramesh said.

The takeover offer follows two previous proposals made by the consortium in March at $5.04 and $5.42 per share that were not made public.

“The Santos Board confirms that, subject to reaching agreement on acceptable terms of a binding scheme implementation agreement, it intends to unanimously recommend that Santos Shareholders vote in favour of the potential transaction, in the absence of a superior proposal,” it added.