Adnoc's XRG-led consortium withdraws $19bn bid for Australia’s Santos

The companies, including ADQ and Carlyle, made an indicative offer in June to buy Australia's second-largest gas producer

A combination of factors have affected the energy consortium’s assessment of its indicative offer for Santos. Reuters

A consortium led by Adnoc’s global energy investment arm XRG has withdrawn its offer to buy Santos, Australia's second-largest gas producer.

“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,” XRG said in a statement on Wednesday.

In June, the consortium which includes Abu Dhabi's sovereign wealth fund ADQ and global investment firm Carlyle made a $19 billion indicative offer to buy Santos.

The proposal included the acquisition of 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 before its implementation.

The move in June followed two confidential, non-binding and indicative proposals from the XRG-led consortium to buy Santos shares on March 21 for $5.04 in cash per share and on March 28 for $5.42 in cash per share.

“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 statement said.

The consortium is also 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”, it added.

XRG was launched last year as an international lower-carbon energy and chemicals investment company, with an enterprise value exceeding $80 billion.

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.

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 and the rise of emerging economies.

In July, Adnoc said it planned to transfer its 24.9 per cent stake in Austrian energy company OMV to XRG, as the Abu Dhabi company seeks to consolidate its global investments under the unit.

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XRG has this year also closed several international deals, including Arcius Energy, its joint venture with BP for upstream gas in Egypt, its stake in the Absheron gas and condensate field in Azerbaijan, and its participation in Offshore Block 1 in Turkmenistan.

Last year, the company also bought a 10 per cent stake in the Area 4 concession in Mozambique's Rovuma Basin liquefied natural gas project.

In December, XRG announced the acquisition of German chemicals company Covestro for an enterprise value of €14.7 billion ($15.3 billion) after its shareholders accepted a takeover offer.

“As a strategic long-term investor, 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 which we will continue to pursue,” XRG said on Wednesday.

Earlier this month, Sheikh Khaled bin Mohamed, Crown Prince of Abu Dhabi and Chairman of the Abu Dhabi Executive Council, led a meeting of the executive committee of Adnoc's board and underlined the importance of its international expansion through XRG.

This will help the company remain “resilient and competitive, reinforcing its position to generate and maximise long-term value in a rapidly evolving global energy landscape”, Abu Dhabi Media Office said.

A Santos pilot well operates on a farm property in Narrabri, Australia. Bloomberg

Adnoc this month also decided to transfer its equity stakes in its listed companies to XRG, with the move not expected to affect operations, teams or the strategic direction of the entities.

The companies included in the transfer are Adnoc Distribution, Adnoc Drilling, Adnoc Gas and Adnoc Logistics and Services, all listed on the Abu Dhabi Securities Exchange.