SEATTLE (Oil Monster): Abu Dhabi National Oil Co. dropped its planned $19 billion takeover of Australian natural gas producer Santos Ltd., walking away from an ambitious effort to expand overseas after failing to agree on key terms.
A “combination of factors” discouraged the company’s XRG unit from making a final bid, it said Wednesday. The decision was strictly commercial and reflected disagreement over issues including valuation and tax, people familiar with the matter said, asking not to be identified discussing private information.
It’s a notable retreat for XRG, the Adnoc spinoff launched to great fanfare last year and tasked with deploying Abu Dhabi’s billions into international dealmaking. The firm has been looking to build a global portfolio, particularly in chemicals and liquefied natural gas, and nixing the Santos transaction may slow an M&A drive aimed at diversifying the Middle Eastern emirate away from crude.
The company made its indicative offer in June with a consortium that included Abu Dhabi Development Holding Co. and Carlyle Group Inc. The board of Santos, Australia’s second-largest fossil-fuel producer, recommended the $5.76-a-share proposal, which represented a 28% premium to the stock price at the time.
But although the shares surged that day, they have remained well below the offer price, potentially indicating investors were skeptical the consortium could land the deal. Santos extended an exclusivity period for a second time last month, saying the group had sought more time to complete due diligence and obtain approvals.
“The market will ask questions about Santos’ valuation after this,” Saul Kavonic, an energy analyst at MST Marquee, said by email. Investors may be wary about “any skeletons that may be lurking there, all the more so because XRG was a less price-sensitive buyer than most, yet still couldn’t make it work.”
Santos’ American depositary receipts slumped as much as 9.5% to $4.69 on Wednesday.
Courtesy: www.livemint.com
