Adnoc’s XRG leads $19bn bid to buy Australian gas producer Santos

Offer price set at $5.76 per share to acquire all of the ordinary shares in Santos

A model of a carbon capture and storage system designed by Australia's Santos. The company owns LNG, pipeline gas and oil assets. Reuters

Adnoc’s global energy investment arm XRG has made a $19 billion indicative offer to buy Australia's second-largest gas producer Santos, as the Abu Dhabi company aims to boost its liquefied natural gas production.

Under the proposal, the consortium led by XRG, including Abu Dhabi's sovereign wealth fund ADQ and global investment firm Carlyle, proposes to acquire 100 per cent of the ordinary shares in Santos for $5.76 per share in cash, adjusted for any dividends declared or paid by Santos prior to implementation of the proposal, XRG said in a statement on Monday.

The XRG-led consortium aims to “build on Santos’s strong and longstanding legacy as a trusted and reliable energy producer, unlocking additional gas supply for Santos’s customers, and strengthening domestic and international energy security”, XRG said, adding that the proposed transaction is aligned with its strategy to build an integrated global gas and LNG business.

The move comes after two previous offers in March, Santos said. The indicative proposal is expressed as a “final non-binding indicative offer” and follows two confidential, non-binding and indicative proposals from the XRG-led consortium to acquire Santos shares on March 21 for $5.04 in cash per share and on March 28, 2025, for $5.42 in cash per share, the Adelaide-based company said in a separate statement.

Adnoc's Al Kaabi speaks about future energy demand at GasTech

03:42

Adnoc’s bid for Santos highlights the strategic value of Australian gas assets at a time when long-term energy security is front of mind,” said Josh Gilbert, market analyst at trading platform eToro.

“A 28 per cent premium on Santos’s share price is a strong vote of confidence for Santos. Importantly, for Adnoc, Santos represents a solid growth opportunity as a reliable LNG player with strong export links,” he said.

“In what is a volatile energy market, locking in supply from a stable, resource-rich country like Australia makes strategic sense.”

Earlier this month, XRG said it aims to have a gas and LNG business with capacity of between 20 million and 25 million tonnes per annum by 2035. XRG's board, which includes Dr Sultan Al Jaber, Minister of Industry and Advanced Technology and Adnoc group managing director and chief executive, former BP chief executive Bernard Looney and Blackstone’s Jon Gray, approved a five-year business plan for the company.

XRG was launched last year as a global lower-carbon energy and chemicals investment company, with an enterprise value exceeding $80 billion. The company has been actively scaling up its operations globally and plans to double its asset value over the next decade, capitalising on energy transition, artificial intelligence advances and the rise of emerging economies.

XRG’s chemicals platform aims to become a top-five global player, producing and delivering chemical and speciality products to meet a projected 70 per cent increase in global demand by 2050, Adnoc said last year. It is investing in natural gas projects to meet growing demand for the fuel and its supercooled form, LNG.

Last month, XRG said is teaming up with Malaysia’s Petronas to expand its footprint in Central Asia with a stake in Turkmenistan's offshore gas and condensate field. The two companies also signed a long-term gas sales agreement with state company Turkmengas as part of the deal.

Last year, the Adnoc unit bought a stake in NextDecade's Rio Grande LNG export facility in Texas, US, along with other acquisitions in Mozambique and Turkmenistan.

In December, XRG also announced the acquisition of German chemicals company Covestro for an enterprise value of €14.7 billion ($17 billion) after its shareholders accepted a takeover offer.

Meanwhile, XRG’s proposal for Santos is awaiting approval. “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,” XRG said.

The XRG-led consortium, which has engaged JP Morgan as its financial adviser and Linklaters and Allens as legal advisers for the potential deal, said the Santos board will be providing XRG with access to confirmatory due diligence “on an exclusive basis” before formalising the offer.

XRG is also working closely with the existing management team to accelerate growth and support local employment and the communities where Santos operates, it added.

“For Santos shareholders, this is a welcome moment after years of M&A speculation. Even if this deal doesn’t come to fruition, for Santos, it may draw other suitors or merger talks back to the table, which is a good position to be in,” said eToro’s Mr Gilbert.

XRG said that subject to the implementation of the approval, the consortium intends to ensure Santos, which owns LNG, pipeline gas, and oil assets, continues to make future-facing investments in Santos’s carbon capture and storage projects, low carbon fuels and other decarbonisation initiatives.