XRG consortium’s $19 billion bid for Australia’s Santos fails

XRG, the lower-carbon global investment arm of Abu Dhabi’s national oil company ADNOC, has walked away from a $19 billion takeover bid for Australian energy company Santos after the parties failed to agree on key terms.

Santos shares fell 12% on Thursday in trading on Sydney’s ASX, wiping some $2 billion off its market value.

A consortium led by XRG and including Abu Dhabi sovereign wealth fund ADQ and private equity firm Carlyle made the play for Australia’s second-largest gas producer in June. 

While the deal promised to be the largest all-cash buyout in Australian history, analysts expressed doubts over whether the sale would materialize after a lukewarm reception from shareholders and uncertainty over whether it would win regulatory approval.

Santos, a perennial takeover target still smarting from failed talks with domestic rival Woodside Energy last year, has stakes in prized gas assets in Papua New Guinea as well as its major Australian LNG projects. 

The failed deal and three months of lost time is also a setback for XRG, which is rapidly scaling up global operations and has set an ambitious goal to build a gas and LNG business with capacity of 20-25 million metric tons a year by 2035. 

The company, which was launched late last year with an enterprise value of more than $80 billion, is also facing headwinds in Europe, where its $17 billion acquisition of German chemicals firm Covestro is under review by the European Commission.