Woodside Energy and Santos have announced that they had ended talks to create a possible A$80bn (US$52bn) global oil and gas giant.
Woodside, which is said to be more than twice as large as Santos in terms of market value and revenue, said that 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.
According to available reports, 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.
In a statement after “an initial exchange of information, Santos said that sufficient combination benefits were not identified to support a merger that would be in the best interests of Santos shareholders”.
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“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’s 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, the 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.
Story was adapted from the Guardian.
