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A consortium led by Abu Dhabi’s national oil company has made a $19bn bid to take over one of Australia’s largest energy groups.
Santos said XRG, an investment arm of the Abu Dhabi National Oil Company, had made an indicative cash offer of $5.76 a share, valuing the Adelaide-based company at $18.7bn. It represents a 28 per cent premium to Santos’s closing share price last week.
Abu Dhabi Developmental Holding Company and US private equity fund Carlyle are also in the bidding group.
If the deal closes, it would be the largest takeover of an Australian company, according to data compiled by Dealogic based on the cash paid and total deal size of $22bn including debt.
That value would surpass the sale of Sydney Airport to infrastructure investors, Blackstone’s acquisition of AirTrunk and the merger of Woodside and BHP’s oil and gas operations.
Santos said its board would recommend the offer, subject to terms being agreed, and that it had rebuffed two lower bids from the XRG-led group in late March.
Santos’s shares opened 11 per cent higher in Australia on Monday.
The bid for the natural gas developer comes during a period of volatility in the energy markets as conflict escalates between Israel and Iran.
Santos has been linked with a sale, break-up or asset selldown for two years and held talks with Australian rival Woodside over a merger last year without striking a deal.
Adnoc has been linked with a takeover in the past due to the Australian company’s development pipeline in natural gas and its supply arrangements into Asia.
Adam Martin, an analyst at E&P, said a growing focus on the value of liquefied natural gas assets had put Santos back into play.
“Now does feel like an opportune time to acquire Santos with risks building on energy prices and Santos entering a free cash inflection phase with the completion of several major growth projects,” he said.
Australia and the United Arab Emirates signed a free trade agreement last year as part of a closer alliance between the two countries on agriculture. Analysts at Citi said Australia’s Foreign Investment Review Board might nonetheless be a “significant hurdle” for XRG, given that Santos is a key supplier to Australia’s domestic gas market.
Jim Chalmers, Australia’s treasurer, who will have final say over the deal, said on Monday in an interview with broadcaster ABC that ruling on whether Santos could be acquired was a “big decision” for the country but that he would not pre-empt the review board’s ruling.
XRG was created by Adnoc to invest in global energy assets, with a particular focus on natural gas, chemical and low-carbon technologies.
Santos fits that strategy given its development of gasfields and carbon capture and storage assets including the Moomba field in remote South Australia.
In December Sultan Al Jaber, Adnoc’s chief executive, said XRG would have an enterprise value of “over $80bn” and wanted to double the value of its assets over the next decade.
Bernard Looney, the former head of oil major BP, is a member of the XRG board.
Additional reporting by Arjun Neil Alim in Hong Kong
