Woodside and Santos end talks on $80bn merger to create oil and gas giant
Woodside and Santos end talks on $80bn merger to create oil and gas giant | Woodside | The Guardian
Woodside Energy and Santos said on Wednesday they had ended talks to create a possible A$80bn (US$52bn) global oil and gas giant.
Woodside, which is more than twice as large as Santos in terms of market value and revenue, said it would only pursue a deal that would add value for its shareholders.
Santos shares dropped 5% soon after the news was announced while Woodside‘s stock rose 2% on Wednesday.
The talks fell apart as the two companies could not agree on a valuation level, according to two sources with direct knowledge of the matter who could not be named discussing confidential information.
A firm bid did not emerge from Woodside following the almost two months of due diligence and negotiations that the parties undertook, one of the sources said.
Woodside declined to comment on those points and Santos did not immediately respond to a request for comment.
Santos said in a statement after “an initial exchange of information, sufficient combination benefits were not identified to support a merger that would be in the best interests of Santos shareholders”.
“We have a strong balance sheet and continue to review options to unlock value for shareholders,” it said.
If the merger had taken place, it would have created a major global liquefied natural gas (LNG) producer that could attract more offshore investors as gas is seen as a key bridging fuel in the shift to cleaner energy.
“While the discussions with Santos did not result in a transaction, Woodside considers that the global LNG sector provides significant potential for value creation,” Woodside CEO Meg O*Neill said in a statement.
Woodside had faced pressure from some investors not to pay a premium for Santos in what would have been one of the largest corporate takeovers in Australian history.
“Woodside‘s decision to walk away is a relief,” said Simon Mawhinney, chief investment officer at Allan Gray which holds A$700m worth of Woodside stock. The fund last week wrote to management warning against pursuing a deal.
“We had hoped this would be the outcome,” Mawhinney said. “It was unclear to us where there was much merit in a tie up. It further cements our view about Woodside‘s capital discipline.”
Woodside and Santos are among Australia’s largest greenhouse gas emitters.
Related Knowledge Center: Climate economics
Climate change is now a driver of the world’s economy. The impact is profound:
- Catastrophic weather events — hurricanes, floods, droughts, high temperatures — are more frequent and more extreme. The cost can be measured in both the initial damage caused and the longer-term impact on the economy.
- Vulnerable communities are increasing climate-related investments, hardening infrastructure and taking other protective measures.
- Investment in carbon capture and storage technologies is increasingly rapidly.
- Governments are making investments and crafting regulations to reduce emissions of carbon dioxide and other greenhouse gases.
On top of all of this is the cost of uncertainty. As the Fourth National Climate Assessment, released in 2018 by the U.S. Global Change Research Program, says, “The assumption that current and future climate conditions will resemble the recent past is no longer valid.”