ADNOC Consortium’s A$30 Billion Takeover Bid for Santos in 2025

What is the ADNOC-led takeover bid for Santos?

The Abu Dhabi National Oil Company (ADNOC), through its subsidiary XRG P.J.S.C, has made a significant move into the Australian energy market with a A$30 billion (US$19 billion) takeover offer for Santos Ltd, Australia's second-largest gas producer. This all-cash bid values Santos at US$5.76 (A$8.89) per share, representing a substantial 28% premium over Santos' closing price before the announcement.

The takeover bid marks a strategic expansion for ADNOC into the Asia-Pacific region and highlights the growing interest of Middle Eastern energy giants in diversifying their global portfolios amid the energy transition insights.

The consortium structure

The bid is structured through a powerful consortium bringing together complementary expertise:

• XRG P.J.S.C: The ADNOC subsidiary leading the consortium
• ADQ: Abu Dhabi's sovereign wealth entity providing financial backing
• Carlyle Group: US-based private equity firm with extensive energy sector experience

This marks ADNOC's first major entry into the Australian market, signaling its ambition to become a more prominent player in global LNG markets.

Previous approaches and offer evolution

The current proposal follows a methodical escalation in valuation:

• March 21, 2025: Initial confidential approach at US$5.04 (A$8.00) per share
• March 28, 2025: Improved second offer at US$5.42 (A$8.60) per share
• June 16, 2025: Current offer at US$5.76 (A$8.89) per share, representing the 28% premium

According to Santos' ASX announcement, the ADNOC consortium aims to "build on Santos' legacy as a trusted energy producer, unlocking additional gas supply for customers and strengthening energy security" in Australia and the broader region.

Why is the Santos board considering the offer?

The Santos board has granted the ADNOC-led consortium exclusive due diligence rights, indicating serious consideration of the proposal. This decision follows extensive consultation with financial and legal advisors to evaluate the bid's merits against Santos' standalone value potential.

The timing is particularly significant as it comes after Santos' failed merger discussions with Woodside Energy in 2023-2024, which could have created an A$80 billion Australian energy champion.

Board's conditional support

The board's preliminary recommendation for shareholders includes several important conditions:

• Independent expert confirmation that the offer is fair and reasonable
• No superior proposals emerging during the due diligence period
• Successful negotiation of a formal scheme implementation agreement
• Regulatory approvals being obtained

These safeguards protect shareholder interests while allowing proper evaluation of the substantial premium offered.

Strategic timing considerations

The proposal comes at a pivotal moment in Australia's energy landscape:

• Following stalled merger discussions with Woodside Energy that could have created an A$80 billion entity
• Coinciding with the Australian Labor government's comprehensive review of east coast gas market regulations
• Amid growing recognition of natural gas's role in energy transition as a lower-carbon alternative to coal

As Saul Kavonic, energy analyst at MST Financial, noted, the bid faces "FIRB approval risks due to Santos' control of critical infrastructure," and "spinning out assets could complicate decommissioning liabilities" – highlighting the complex regulatory environment the deal must navigate.

What commitments has the ADNOC consortium made?

To address potential regulatory concerns and smooth the path to approval, the ADNOC consortium has made several substantial commitments regarding Santos' Australian operations and strategic direction.

Operational commitments

The consortium has pledged to:

• Maintain Santos' corporate headquarters in Adelaide
• Support ongoing employment across Santos' Australian operations
• Continue community engagement and social investment programs
• Prioritize further gas development investments in Australia

These commitments aim to address potential concerns about foreign ownership of a critical Australian energy producer.

Strategic energy commitments

Beyond operational continuity, the consortium has outlined broader strategic energy priorities:

• Unlock additional gas supply for Santos' Australian customers
• Strengthen both domestic and international energy security
• Advance carbon sequestration technology and projects
• Support Santos' pioneering Moomba CCS project in South Australia, which targets 1.7 million tons of CO₂ storage annually by 2027

The CCS collaboration is particularly notable given ADNOC's experience with its Habshan CCS project in the UAE, which aims to capture 5 million tons of CO₂ annually by 2030. This technical expertise could accelerate Santos' decarbonization efforts while maintaining its gas production portfolio.

What regulatory hurdles does the deal face?

The proposed acquisition must navigate a complex regulatory landscape before completion, with national interest and competition concerns at the forefront.

Key regulatory approvals required

Multiple Australian regulatory bodies will review the transaction:

• Foreign Investment Review Board (FIRB): Must determine if the acquisition aligns with Australia's national interest
• Australian Competition and Consumer Commission (ACCC): Will evaluate potential market concentration effects
• Other statutory bodies: Including approval for transfer of various operating licenses and permits

The FIRB review is particularly critical, as it will assess national security implications, domestic gas supply impact, and the consortium's commitments to Australia.

Potential regulatory concerns

Several issues may draw regulatory scrutiny:

• Critical infrastructure control: Santos operates essential gas infrastructure across Australia
• Domestic gas supply security: Potential impact on east coast gas availability and pricing
• Decommissioning liabilities: Santos' aging Cooper Basin assets carry estimated A$1.2 billion in future decommissioning costs
• National energy security: Ensuring continued reliable supply to Australian consumers and businesses

As energy analyst Saul Kavonic observed, while "Carlyle may target infrastructure spin-offs, decommissioning liabilities complicate this approach" – highlighting the intricate balance between commercial interests and regulatory requirements.

The 2023 FIRB rejection of a Canadian bid for Australian copper assets on national interest grounds demonstrates that foreign investment in critical resources remains under heightened scrutiny.

How might this impact Australia's domestic gas market?

The takeover could significantly influence Australia's domestic gas market dynamics, particularly as the government reviews policies to address supply and pricing concerns.

Current market challenges

Australia's east coast gas market faces several pressing issues:

• Persistent supply pressures as legacy fields decline
• Criticism of Santos' Gladstone LNG (GLNG) export facility for purchasing domestic gas to fulfill export contracts
• East coast wholesale gas prices that rose approximately 45% year-over-year to A$16/GJ in Q1 2025
• Growing concerns about affordability for both industrial users and residential consumers

Santos' position as both a major domestic supplier and LNG exporter makes its ownership particularly significant for Australian energy policy.

Potential government leverage points

The federal government may use the regulatory approval process to secure commitments:

• Extracting domestic gas supply guarantees as a condition of transaction approval
• Implementing transparency reforms between producers and buyers
• Creating mechanisms to reward companies prioritizing domestic supply
• Potentially adopting elements of Western Australia's successful 15% domestic gas reservation policy (in place since 2006)

The timing of the bid, coinciding with the government's east coast gas market review launched on June 9, 2025, creates a unique opportunity for policy intervention that could reshape the market for years to come.

What are the strategic benefits for ADNOC?

For ADNOC, this acquisition represents a transformative step in its global expansion strategy and energy transition positioning.

Global expansion strategy

The acquisition delivers several strategic advantages:

• Portfolio diversification: Reducing reliance on Middle Eastern assets
• LNG market access: Santos' 4.5 million tons of LNG capacity complements ADNOC's target of 15 million tons by 2027
• Asia-Pacific foothold: Direct access to key growth markets like Japan, South Korea, and China
• Established infrastructure: Leveraging Santos' existing production, processing, and export facilities

ADNOC's 2024 acquisition of Egypt's LNG export terminal (2.5 million tons/year) demonstrates its commitment to building a global LNG portfolio, with Santos representing its largest move yet.

Energy transition positioning

The acquisition also advances ADNOC's energy transition strategy:

• Carbon capture expertise: Combining ADNOC's UAE CCS projects with Santos' Moomba initiative
• Gas-led transition: Positioning natural gas as a bridge fuel during decarbonization
• Balanced portfolio: Maintaining traditional energy assets while developing lower-carbon alternatives
• Future-proofing: Creating optionality as energy exports challenges evolve

As ADNOC stated in its June 16 announcement, the company is "building a leading integrated global gas business" – with Santos representing a cornerstone of this ambition.

The potential synergies are substantial, with analysts estimating the combined entity could save approximately A$500 million annually in LNG shipping and logistics costs alone.

How does this fit into broader oil and gas industry consolidation?

The proposed Santos takeover is part of a significant trend of consolidation reshaping the global oil and gas landscape.

Industry consolidation context

Several major deals highlight this acceleration:

• Failed Santos-Woodside talks: Discussions about creating an A$80 billion Australian energy champion ended unsuccessfully in early 2024
• ExxonMobil-Pioneer: US$64 billion acquisition (2023) consolidating U.S. shale assets
• Chevron-Hess: US$53 billion deal (2024) expanding Chevron's global portfolio
• Woodside-BHP Petroleum: A$55 billion merger (2022) creating Australia's largest energy company

This wave of consolidation reflects companies seeking scale, synergies, and portfolio optimization amid energy transition pressures.

Market implications

The ADNOC-Santos deal carries several broader implications:

• Middle Eastern expansion: Gulf oil producers increasingly deploying capital globally
• Private equity influence: Carlyle's US$17 billion energy portfolio (2024) exemplifies private equity's growing role
• Speculation about other targets: As MST Marquee analysts noted, "oil price movements and BP's underperformance spark takeover speculation amid Middle Eastern interest"
• Asia-Pacific energy landscape: Changing competitive dynamics among regional producers and processors

This consolidation trend reflects both defensive positioning (achieving scale to withstand volatility) and offensive strategy (securing assets for long-term growth) as the energy transition unfolds.

What are the potential outcomes for Santos shareholders?

Santos shareholders face several potential scenarios as the takeover process unfolds over the coming months.

Shareholder considerations

The proposal offers several clear benefits:

• Substantial premium: 28% over recent trading price, exceeding the ASX 200 Energy Index's 12% average premium (2020-2024)
• All-cash offer: Providing immediate and certain value realization
• Attractive exit opportunity: Following years of share price underperformance relative to global peers
• Limited alternatives: After the failed Woodside merger discussions

However, shareholders must also weigh potential risks of a long regulatory review period and the possibility of competing bids emerging.

Timeline and next steps

The process will follow a structured timeline:

1. Due diligence period: 8-12 weeks of consortium access to Santos' detailed financial and operational information
2. Scheme implementation agreement: Formal documentation of the transaction terms
3. Independent expert assessment: Valuation of fairness and reasonableness
4. Shareholder vote: Requiring 75% approval under Australia's scheme of arrangement process
5. Regulatory approvals: FIRB and ACCC reviews expected to take 3-6 months
6. Transaction completion: Targeted for Q1 2026 if all conditions are met

The failed 2024 Origin Energy takeover bid, rejected by shareholders despite offering a 33% premium, demonstrates that investor approval cannot be taken for granted, particularly for assets considered strategically valuable in the energy transition.

FAQs About the Santos Takeover Bid

Why is ADNOC interested in Santos specifically?

ADNOC is strategically expanding its global gas and LNG portfolio, with Santos offering several compelling advantages:

• Control of approximately 18% of Australia's gas production
• Established LNG export facilities with direct access to Asian markets
• Complementary portfolio to ADNOC's Middle East assets
• Advanced carbon capture projects aligning with ADNOC's sustainability goals

The acquisition fits ADNOC's stated ambition to build a leading integrated global gas and LNG business while diversifying its geographical footprint.

Could the Australian government block the takeover?

Yes, the Australian government could potentially block the takeover through the Foreign Investment Review Board (FIRB) if it determines the acquisition is not in the national interest. According to Australian Treasury data, FIRB has blocked 4 out of 32 major foreign bids since 2023, indicating significant scrutiny of critical infrastructure transactions.

Key factors that will influence the decision include:

• Impact on domestic gas supply security
• National security considerations
• The consortium's commitments to maintain Australian operations
• Decommissioning guarantees for aging assets

Will this affect domestic gas prices in Australia?

The impact on domestic gas prices remains uncertain and will likely depend on conditions negotiated during the regulatory approval process. The federal government may leverage the transaction to secure domestic supply commitments similar to Western Australia's reservation policy, which has successfully stabilized prices in that state.

The government's ongoing east coast gas market review creates an opportunity to address long-standing concerns about:

• Domestic gas availability
• Price transparency
• Export versus domestic market prioritization
• Infrastructure access for new market entrants

What happens if the deal falls through?

If the deal falls through, Santos would likely pursue several alternative strategies:

• Revisiting merger discussions with other Australian or international energy companies
• Accelerating its internal portfolio optimization and cost reduction initiatives
• Potentially divesting non-core assets to enhance shareholder returns
• Focusing on its Moomba CCS and other decarbonization projects to reposition for the energy transition

Given the substantial premium offered, Santos' share price would likely experience significant near-term pressure in the event of a failed transaction.

How does this compare to other recent energy sector deals?

At A$30 billion (US$19 billion), this would rank among the largest energy sector acquisitions in recent years in the Asia-Pacific region:

• Larger than Woodside's A$20 billion merger with BHP Petroleum (2022)
• Smaller than the proposed but failed A$80 billion Santos-Woodside combination
• Represents a higher premium (28%) than the sector average (12-15%)
• Includes stronger operational commitments than typical cross-border transactions

The all-cash nature of the offer also distinguishes it from many recent energy mergers that involved stock exchanges, reflecting the consortium's confidence in Santos' underlying asset value according to Reuters reports. Furthermore, the bid comes amid ongoing volatility in US gas price forecasts, making the timing strategically significant.

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