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The consortium, led by the National Petroleum Company in Abu Dhabi, has placed a $19 billion bid to take over one of Australia’s largest energy groups.
Santos said XRG, the investment arm of Abu Dhabi National Petroleum Company, made a cash offer of $5.76 per share, valued the Adelaide-based company at $18.7 billion. This represents a 28% premium on Santos’ stock price last week.
The Abu Dhabi Development Owner and the US Private Equity Fund Carlyle are also part of the bidding group.
If the transaction closes, it will be the biggest acquisition of an Australian company, according to data compiled by the transaction based on $22 billion in cash, including debt and total transaction size.
Its value outweighs the sale of Sydney Airport to infrastructure investors, the acquisition of Blackstone’s Airtrunk, and the merger of Woodside and BHP’s oil and gas operations.
Santos said its board recommended the offer and rejected two low bids from the XRG-led group in late March, subject to terms agreed.
Santos shares rose 11% in Australia on Monday.
Natural gas developer bids come during the period of energy market volatility as conflict escalates between Israel and Iran.
Santos has linked it to two years of sales, disbanding or asset sales, and discussed the merger last year with Australian rival Woodside without signing a contract last year.
ADNOC has previously linked takeovers with Australian companies’ natural gas development pipelines and supply arrangements to Asia.
E&P analyst Adam Martin said that focusing on the value of liquefied natural gas assets has brought Santos back.
“Now, once some major growth projects are complete, it feels like the perfect time for Santos to acquire Energy Price and the risk that Santos enters the free cash resolution phase,” he said.
Australia and the United Arab Emirates signed a free trade agreement last year as part of a closer alliance between the two countries on agriculture. City analysts said Australia’s Foreign Investment Review Board could be a “significant hurdle” for XRG given that Santos is a major supplier of Australia’s domestic gas market.
Australian treasurer Jim Chalmers has gained final say on the deal and said in an interview with broadcaster ABC on Monday that the ruling on whether Santos could be acquired is a “big decision” for the country, but will not preempt the ruling from the review board.
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XRG was created by ADNOC and invests in global energy assets, focusing on natural gas, chemicals and low carbon technologies in particular.
Santos fits that strategy considering the development of gas fields and carbon capture and storage assets, including remote movie fields in South Australia.
ADNOC CEO Sultan Al Jaber said in December that XRG has an enterprise value of “over $80 billion” and would like to double the value of its assets over the next decade.
Bernard Droney, former head of Oil Major BP, is a member of the XRG board.
Additional Reports by Arjun Neil Alim in Hong Kong
