ADNOC bids to acquire Australian Energy Giant Santos
Abu Dhabi National Oil Company's investment arm XRG has submitted a $19bn cash bid for Australian energy giant Santos, representing a 28% premium at $5.76 per share.
The proposed acquisition would become Australia's largest takeover at $22bn including debt, surpassing previous landmark deals. Santos's board has recommended the offer, driving shares 11% higher on opening. The consortium includes Abu Dhabi Developmental Holding Company and US private equity firm Carlyle, targeting Santos's natural gas development pipeline and Asian supply arrangements. The bid emerges during heightened energy market volatility amid Israel-Iran tensions and follows Santos's two-year strategic review process. Australia's Foreign Investment Review Board approval represents a critical hurdle, given Santos's role as a key domestic gas supplier.
The deal aligns with XRG's $80bn enterprise value mandate to double asset values over the next decade, focusing on natural gas, chemicals, and low-carbon technologies including Santos's Moomba carbon capture facilities.
Forecast Scenarios (GCHQ)
Likely (65%): Conditional Approval with Strategic Asset Retention
The Foreign Investment Review Board approves the acquisition within 6-9 months, requiring Santos to maintain Australian operational headquarters and domestic gas supply commitments. XRG accepts conditions including board representation limits and technology transfer restrictions. Santos shareholders approve the deal, completing the transaction by early 2026 with minor premium adjustments. The precedent encourages similar Middle Eastern investments in Australian energy infrastructure under structured approval frameworks.
Realistic Possibility (50%): Extended Review Process with Price Renegotiation
Political pressure extends the approval process beyond 12 months, prompting XRG to increase the offer price to $6.20 per share to maintain shareholder support. Additional conditions require establishing an Australian sovereign wealth fund partnership or local co-investment requirements. The deal completes with modified terms, setting new standards for foreign energy acquisitions. Regulatory uncertainty creates temporary volatility in broader Australian energy sector valuations.
Unlikely (35%): Regulatory Rejection Triggers Alternative Structures
The Foreign Investment Review Board rejects the acquisition citing national security concerns over critical infrastructure control. XRG pivots to a minority stake acquisition below 20% or structured partnership arrangement with Santos. Alternative buyers emerge, including domestic superannuation funds or Woodside's renewed merger interest. Santos pursues independent strategic asset optimization, potentially spinning off international operations while retaining domestic assets under Australian control.
