Santos CEO commits to 'full binding bid' by late September
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The news: Santos CEO Kevin Gallagher is confident that the XRG consortium will have secured all necessary internal approvals to enable a binding scheme takeover bid to be presented to shareholders by 19 September.
Santos shares rallied 1.1% to $7.84 at 2:18pm AEST.
Explaining the reasons why the original six-week exclusive due diligence process had blown out by four weeks to analysts following the company’s half-year 2025 results, Gallagher confirmed that the parties had been discussing the terms of a scheme implementation agreement (SIA).
Santos’ management only became aware that the consortium also required its own internal approvals before a binding agreement could be finalised, Gallagher told analysts on a call.
“This is a big transaction. I believe it'd be the largest all-cash transaction ever on the ASX, and I think the largest all-cash, energy sector transaction globally. And so what became apparent during that period and during the SIA detailed discussions was that things were taking a bit longer, and we got more clarity on the internal corporate approvals processes,” he said.
The bid consortium also comprises US private equity firm Carlyle Group and Abu Dhabi institutional investor ADQ, and each partner will need to have the bid approved by its respective management and shareholders, which in XRG’s case is Abu Dhabi National Oil Company, and Carlyle and ADQ’s limited partners.
These approvals need to occur before Santos can put the scheme to its own shareholders, according to a source familiar with the consortium.
Gallagher dodged questions on specific terms and conditions in the SIA given that these talks had not been finalised but reiterated that the consortium remained committed to its bid and had not found anything throughout the due diligence process to dissuade it from continuing.
He likewise declined to comment on whether a delay to the XRG approval processes would in turn delay the required Foreign Investment Review Board and Australian Competition and Consumer Commission approvals, which one analyst suggested could drag the scheme timeline well into 2026.
"The other thing I would say is that [XRG] has also demonstrated a commitment to the transaction, a very strong commitment to the transaction, and a commitment to expedite those approvals over the four week process," Gallagher said.
"And so, following those discussions, following the progress, find the strong commitment from XRG, the board selected to grant that extension, and we'll be working very diligently with XRG to help them make that happen."
Analysts also voiced concern about whether a process delay might mean shareholders receive lower dividends for H2 2025 and 1H 2026. A Santos ASX announcement confirmed an "adjusted" dividend would be paid at the end of FY 2025 but did not go into specifics.
Santos grants second takeover due diligence extension to XRG and Carlyle Group
The news: Abu Dhabi's XRG and Carlyle Group have been granted a second extension to their due diligence period for Santos after their exclusivity expired last Friday.
The numbers: The consortium's $36.4 billion all-cash offer is the largest in Australian history and translates to $8.96 a share.
Santos shares last traded at $7.76 at market close on Friday.
The context: Santos delayed the release of its half-yearly results to today from last Wednesday so it could coincide with the due diligence process update.
The oil and LNG specialist first issued a process deed to allow the consortium access to exclusive due diligence from for a six-week period on 27 June. Moments before the exclusivity expired, Santos granted an extension to 22 August.
XRG, the offshore investment arm of Abu Dhabi oil major ADNOC, has publicly stated its desire to invest in and develop Australian gas resources for the long term to ward off fears that the consortium would not act in the national interest if it acquired Santos.
Santos confirmed that it and the XRG consortium were "finalising their scheme implementation arrangement" and reiterated that they had not found anything in Santos' business that would prompt them to walk away from a deal.
The consortium is aiming to finalise all necessary approvals before tabling a binding offer for Santos, which reminded shareholders that there was still no guarantee that a scheme takeover bid would emerge.
What they said: "The potential transaction continues to represent a compelling opportunity to leverage the consortium’s operational expertise, investment capacity and long-term investment horizon to unlock additional gas supply, support local employment and contribute to Australia’s energy security," XRG said in a statement.
The sources: ASX, XRG statement, Santos earnings call
