- Abu Dhabi’s ADNOC and partners proposed a record A$36.4B deal to acquire Santos, aiming to expand their global LNG footprint with prized Asia-Pacific assets.
- The government is under pressure to balance foreign investment inflow with national energy security.
Santos, Australia’s second-largest gas producer, announced on Monday, June 16, that it plans to support an all-cash $18.7 billion takeover bid from an international consortium led by Abu Dhabi National Oil Company (ADNOC), as part of ADNOC’s strategy to expand its global gas portfolio.
Following the announcement, Santos shares surged 11% by market close. However, the price remained well below the 28% premium offered, which analysts attributed to concerns that Australian regulators might block the deal.
The consortium, led by ADNOC’s investment vehicle XRG, Abu Dhabi Development Holding Company (ADQ) and private equity firm Carlyle, proposed to pay A$8.89 ($5.76) per Santos share. With net debt factored in, the transaction gives Santos an enterprise value of A$36.4 billion, making it the largest all-cash corporate buyout in Australian history, according to FactSet.
Rystad Energy’s Vice President for Gas and LNG Research, Kaushal Ramesh, noted, “This move aligns with ADNOC’s aggressive growth plans.”
The bid surfaced as oil prices climbed to multi-week highs amid escalating tensions between Israel and Iran, which raised fears of a broader disruption in Middle East oil exports.
By acquiring Santos, the XRG-led consortium gains significant LNG assets, including stakes in Gladstone LNG, Darwin LNG, PNG LNG, and the undeveloped Papua LNG, with the latter considered Santos’s crown jewel. The company is also developing the Pikka oil project in Alaska, scheduled to begin production in mid-2026.
In June, XRG announced its goal to develop a global gas and LNG business with an annual capacity of 20–25 million metric tons by 2035. Santos sold 5.08 million tons of LNG in 2023, over 60% of which came from Papua New Guinea.
“What ADNOC wants is proximity to Asia-Pacific demand, and these LNG assets deliver that,” Ramesh explained.
Santos confirmed that this latest offer followed two earlier, lower proposals from the consortium in March, A$7.78 and A$8.37 per share, which it rejected and did not disclose then.
If the consortium submits a binding proposal, Santos’ board has said it intends to unanimously recommend that shareholders approve the transaction, assuming no superior offer arises.
XRG is negotiating exclusive due diligence access with Santos and aims to finalise the offer soon. To move forward, the deal will require support from at least 75% of Santos shareholders.
In a statement, XRG said, “The proposed transaction aligns with our ambition to build a leading global gas and LNG business.” The firm, launched in November, recently acquired offshore gas interests in Turkmenistan and holds other LNG assets in Mozambique.
However, regulatory approval remains a significant hurdle. The deal needs clearance from multiple authorities, including Australia’s Foreign Investment Review Board (FIRB), Australian Securities and Investments Commission, National Offshore Petroleum Titles Administrator, PNG Securities Commission, PNG Independent Consumer and Competition Commission and the Committee on Foreign Investment in the United States (CFIUS)
XRG has pledged to keep Santos’ headquarters in South Australia to address potential concerns.
Still, analysts remain cautious. MST Marquee senior energy analyst Saul Kavonic warned, “FIRB approval may be a major risk to the deal,” citing Santos’ control of critical energy infrastructure. He added that spinning off domestic assets to ease regulator concerns would be difficult due to high decommissioning liabilities.
Santos has previously fended off major buyout attempts, including a $10.8 billion bid from Harbour Energy in 2018 and merger talks with rival Woodside Energy last year, which could have created an A$80 billion energy giant.
In February, Santos reported a 16% drop in underlying annual profit and slashed its dividend by 41%, reaffirming its need to unlock shareholder value.
While Santos has long been seen as a takeover target, Kavonic said another bid is unlikely. “Only ADNOC appears willing to pay such a premium to realise its global LNG ambitions.”