Citi, Jarden hike Santos target price after XRG-led $30b bid
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The news: Citi and Jarden both raised their target prices for Santos after the oil giant received a $30 billion takeover offer from a consortium led by energy investment company XRG, a subsidiary of Abu Dhabi's state-owned oil company Adnoc, on Monday.
The numbers: Citi upgraded its target price from $6.50 to $8.89, the same value as the consortium's offer price. Jarden lifted its target price from $6.70 to $8.34.
Santos shares climbed 10.9% to $7.72 following Monday's announcement.
The context: Citi analyst Paul McTaggart said the takeover bid is attractive for long-term Santos shareholders, with the offer price commensurate with the full valuation of the company's LNG portfolio, plus growth upside.
He flagged, however, that the 13% gap between the offer price and Monday's closing price suggests market scepticism around required approvals by the Foreign Investment Review Board (FIRB) and federal treasurer Jim Chalmers.
Despite this, McTaggart sees a viable path to approval through conditional commitments, such as domestic gas development, abandonment provisions, and upstream investment.
Jarden analyst Nik Burns also outlined "several hurdles" for the deal, including due diligence, FIRB approval, PNG government consent, and broader regulatory clearances. He also said Middle East tensions pose a "wildcard risk" to market conditions.
However, Jarden retained its 'overweight' rating on Santos, with its share price expected to be driven higher by news flow around corporate activity.
The sources: Citi research, Jarden research
