Woodside and Santos Merger Negotiations End Without Agreement

Woodside and Santos, two rival energy producers, have ended their merger negotiations without reaching an agreement on valuation. This announcement has had a significant impact on the stock market, with Santos shares dropping by nearly 9 percent and Woodside’s rising by 1 percent. The potential merger had the potential to create a global business worth over $80 billion, making it the world’s fourth-largest listed LNG producer. However, Woodside, being more than twice the size of Santos, did not make a bid for the smaller company’s shares after two months of due diligence and negotiations.

Woodside’s CEO, Meg O’Neill, stated that the company conducts thorough due diligence on every opportunity and will only pursue transactions that add value for its shareholders. Although the merger did not materialize, Woodside believes that there is still significant potential for value creation in the global LNG sector.

The creation of a major global LNG producer through the merger could have attracted more offshore investors to this commodity, which is seen as a key bridging fuel in the transition to cleaner energy. However, some Woodside institutional shareholders strongly opposed the deal. Simon Mawhinney, chief investment officer at Allan Gray, expressed relief at Woodside’s decision to walk away from the merger, stating that it was unclear to them where there was much merit in a tie-up.

This is not the first time Woodside has abandoned a deal that would have given it gas assets in Papua New Guinea. The company previously walked away from a similar agreement over eight years ago. As for Santos, Australia’s second-largest LNG producer, it will continue its review into ways to unlock value for shareholders. Analysts and investors speculate that the company may try to sell all or part of its 51 percent share in the Pikka oil project in Alaska to free up cash for new projects and reduce exposure to an asset of questionable value.

The Australasian Centre for Corporate Responsibility declared the merger “dead” and called for a “new vision” for both companies. Harriet Kater, the center’s special advisor, stated that while consolidation is common in a declining market, not every deal makes sense. In the case of Woodside and Santos, investors struggled to see any strategic rationale for a merger.

In conclusion, the Woodside and Santos merger negotiations have come to an end without an agreement on valuation. This outcome has had a significant impact on the stock market, with Santos shares dropping and Woodside’s rising. While Woodside believes there is still potential in the global LNG sector, some Woodside shareholders and analysts expressed relief at the decision to walk away from the merger. Santos will continue its review to unlock value for shareholders, and the Australasian Centre for Corporate Responsibility emphasized the need for a new vision for both companies.