Santos stock slides as $18.7 billion ADNOC-led deal collapses

Santos, the Australian gas producer, saw its shares fall as much as 13.6 percent on Thursday. A consortium led by Abu Dhabi-based ADNOC canceled their $18,7 billion offer for the company after commercial terms were not agreed.

Santos announced in a press release issued early Thursday morning that it had told the XRG group on Monday that it would be willing to close a deal for $5.626 per share.

Santos recently paid a dividend, so the original offer was $5.76 per share. That's $8.89 today.

Santos shares fell to A$6.61 at the opening of trading on Thursday, their lowest price since June 10th. The benchmark S&P/ASX200 index was up 0.45%.

XRG retracted the offer on Tuesday and stated that "a variety of factors, taken together, have impacted Consortium's assessment" of the indicative offer.

FactSet data shows that, after adjusting for net debt, Santos was valued at approximately A$36,4 billion ($24,2 billion). This would have been the largest cash-only corporate buyout ever in Australian history.

Santos will be under pressure now that the deal has failed, as it was the third time in seven years that a buyer had declined to proceed with the offer.

Santos rejected an $10.8 billion bid from Harbour Energy, a private equity-backed company in 2018, and walked out of talks with Woodside Energy, its larger Australian rival. The two companies were discussing a potential A$80 billion oil giant.

Santos has a strong global leadership, a clearly defined strategy and a portfolio of high-quality opportunities for growth. Santos Chairman Keith Spence stated that the board was confident that these strengths would deliver long-term shareholder value.

Jarden, an investment bank, downgraded Santos's rating from overweight to underweight on Thursday following XRG’s exit. Jarden reduces Santos's 12-month target price by 16%, from A$8.40 per share to A$7.05

Nik Burns, Jarden analyst, said: "We expect Santos' shareholders to be hurt by the sudden withdrawal from the proposed takeover and will ask questions about the negotiation tactics of the last few weeks."

We expect share prices to fall in response to these news. However, we also expect investors to profit from any significant sell-offs if they feel the stock is oversold. $1 = 1.5035 Australian Dollars (Reporting and editing by Lincoln Feast, Sonali Paul).

(source: Reuters)