Abu Dhabi state-owned firm makes $36 billion bid for energy giant

ABC NEWS (Australia)

Australian oil and gas giant Santos is the target of a takeover offer worth more than 36 billion dollars from Abu Dhabi national oil company and investment group Carlyle. Despite support from the Santos board, there's no certainty the mega deal will get over the line.

Transcript

00:00This is a massive deal. It's one of Australia's largest takeover bids at a $29 billion value

00:11for Santos' shares at $8.89 per share. But then when you add in the debt that Santos

00:17is carrying, the total deal value is well above $36 billion. A huge deal. Now, the Abu

00:26Derby company wants to come in because currently most of its oil and gas assets are concentrated

00:31in the region, in its own country. It wants to globally diversify and taking on existing

00:38resources that Santos has in Australia. A very lucrative LNG plant in Papua New Guinea and

00:46oil fields that are being developed in Alaska make it an attractive proposition. Analysts

00:52say that the deal really stacks up if the oil price is around US$80 a barrel, which

00:58is just above current levels, but this is in the long term, and if the Australian dollar

01:02is around US$70. So financially, in the long term, it stacks up. For diversification, it

01:09stacks up. There's several layers of approvals that Abu Dhabi's national oil company will

01:16have to go through to get this deal done. First is due diligence. Does it actually want

01:21to go ahead? It is now in the process of looking at Santos's books and seeing if there's anything

01:26in there it doesn't like that it didn't know about. After it decides that it does want to

01:32go ahead with this deal, it will need a raft of regulatory approvals, not only from Australia,

01:37but also from the US, because of Santos's assets there, and also Papua New Guinea, because

01:43of the big LNG plant there. Now, in Australia, the biggest stumbling block is the national interest

01:49test with the Foreign Investment Review Board, and ultimately that will be a decision for

01:54Treasurer Jim Chalmers to make as to whether to allow this deal to go through, and the big

02:00concern there is going to be about domestic gas supplies, because Santos has been fingered

02:05as one of the companies that's exporting a lot of the East Coast gas overseas and pushing up

02:12domestic gas prices through shortages.

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