An Abu Dhabi-led consortium has officially withdrawn its $30 billion takeover bid for Australian oil and gas company Santos. This decision removes the need for the Australian federal government to make a critical assessment regarding the foreign acquisition of the company, which is based in Adelaide. The investment arm of the Abu Dhabi National Oil Company, known as XRG, announced the decision on Wednesday, citing “a combination of factors” that influenced its reassessment but did not provide specifics.
XRG initially submitted a non-binding offer in mid-June 2023 and sought multiple extensions to finalize its proposal. The consortium was expected to submit a binding offer by Friday, which would have placed a significant portfolio of oil and gas assets, including operations in Western Australia and the Cooper Basin, under foreign control. The deal also encompassed critical energy infrastructure in eastern Australia, along with a substantial stake in a liquefied natural gas project in Papua New Guinea.
While the Santos board supported the proposed acquisition, it faced considerable opposition from Australian unions, who expressed concerns over the implications for domestic energy security. The bid required several regulatory approvals and would have been reviewed by the Foreign Investment Review Board, which advises the Australian Treasurer, Jim Chalmers, on such matters.
Analysts noted that the absence of a major Australian partner, such as a superannuation fund, was a significant disadvantage for the consortium. In its statement, XRG had expressed willingness to make long-term commitments to Australian energy production, emphasizing potential benefits for domestic gas consumers and regional energy security.
Despite maintaining a positive outlook on Santos, XRG indicated that the combination of factors led to the negative assessment of its indicative offer. “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,” the statement read.
The withdrawal alleviates pressure on Treasurer Chalmers, who would have faced a challenging diplomatic decision regarding the foreign takeover. Concerns surrounding energy security from foreign ownership are critical, especially in light of Australia’s robust trading relationship with the United Arab Emirates, which includes a bilateral free trade agreement.
In response to the withdrawal, Santos confirmed it had been notified by XRG late on Wednesday. The company stated, “The XRG consortium would not agree to acceptable terms which protected the value of the potential transaction for Santos shareholders, having regard to the likely extended timeframe to completion and the regulatory risk associated with the transaction.”
As the situation develops, the focus now shifts to how Santos will navigate its future without the proposed financial backing from XRG.
