UPDATE: The highly anticipated $36.4 billion takeover bid for Santos has just collapsed, sending shockwaves through the Australian energy market. The XRG consortium, backed by the United Arab Emirates, has officially withdrawn its offer, citing a deadly combination of time constraints, tax concerns, and due diligence issues.
This failure marks a significant blow for Santos CEO Kevin Gallagher, who had hoped to secure what would have been Australia’s largest cash takeover. The deal has faced mounting pressure over the past few months, and investors are now questioning the company’s future amid dwindling confidence.
The XRG consortium initially showed promise, but after twice extending due diligence, they ultimately decided against proceeding. The consortium cited “commercial factors” and expressed frustration over Santos’ demands for timely approvals, which they feared could lead to substantial delays. The proposed bid of $5.76 per share, representing a mere 11 percent premium over current trading values, has now been deemed too risky, especially given potential tax liabilities tied to Santos’ PNG LNG project.
Time was a critical element in this failed bid. It has already been three months since XRG made its approach, and there were concerns it could take an additional six to nine months to finalize the deal, during which market conditions could dramatically shift. Gallagher’s anticipated “swansong” bid is now dead in the water, leaving Santos investors increasingly frustrated as this marks the third failed takeover attempt in just seven years.
The collapse comes as Santos grapples with a challenging operational environment. The Australian energy sector is facing escalating costs due to stringent environmental regulations and rising construction expenses. As a result, the company’s share price is expected to plummet in response to this news, raising urgent concerns about its long-term viability.
Investors are left pondering whether Santos can remain an attractive acquisition target. With only 10 percent of the company’s current value attributed to its domestic gas assets, the focus is now shifting to potential buyers, including major players like Woodside Energy and private equity firm Harbour Energy. However, the question remains: can Santos transform its business model to create shareholder value in this tumultuous market?
As Santos prepares to address shareholders later today, they will need a compelling narrative to regain trust. Spoiled takeover attempts often leave lasting scars, and with investor patience running thin, the company must act decisively to reassure its stakeholders.
In the broader context, the failed XRG takeover underscores the difficulties faced by energy companies in Australia. Access to capital has tightened significantly, making it challenging for developers to fund new projects. With a competitive landscape, only the strongest firms are likely to succeed moving forward.
For now, Santos faces a critical crossroads. The urgency for strategic decisions has never been greater as they navigate this turbulent landscape. Investors and analysts are closely watching to see how the company responds to this latest setback and what steps they will take to stabilize their position in an increasingly volatile market.
