XRG Consortium’s non-binding, indicative proposal to acquire Santos

Santos (ASX:STO) received a non-binding indicative proposal from a consortium led by XRG P.J.S.C., a subsidiary of Abu Dhabi National Oil Company, to acquire all outstanding shares for US$5.76 (A$8.89) per share in cash, representing a 28% premium to the last closing price. The Santos Board will grant the XRG Consortium due diligence access and negotiate a scheme implementation agreement, contingent on customary approvals and an independent expert's assessment, while shareholders are advised to take no action as there is no certainty of a binding agreement.

Analysis

Santos Limited (ASX:STO) has announced the receipt of a non-binding indicative proposal on June 13, 2025, from a consortium, XRG P.J.S.C., which includes a subsidiary of Abu Dhabi National Oil Company, Abu Dhabi Development Holding Company (ADQ), and Carlyle. The proposal offers US$5.76 (A$8.89) per Santos share in cash, representing a substantial 28% premium to the last closing price of A$6.96 and significant premiums over various VWAP periods: 30% to the 1-week, 34% to the 1-month, 44% to the 3-month, and 39% to the 6-month VWAP. This offer, termed a "final non-binding indicative offer," is an escalation from two previous confidential proposals from the same consortium in March 2025 at US$5.04 and US$5.42 per share, respectively, signaling sustained acquisitive interest. The transaction is subject to several key conditions, including satisfactory completion of confirmatory due diligence, the negotiation and execution of a scheme implementation agreement (SIA), and approvals from multiple regulatory bodies such as FIRB, ASIC, NOPTA, PNG authorities, and CFIUS. The Santos Board has determined it is in shareholders' best interests to allow the XRG Consortium due diligence access and to negotiate an SIA, contingent on agreeing to terms for this access, which includes a Process and Exclusivity Deed requested by the consortium. While the Board intends to unanimously recommend the potential transaction if a binding SIA is reached and no superior proposal emerges, and an independent expert confirms its fairness, Santos emphasizes there is no certainty that a binding agreement will materialize or that the transaction will proceed. Goldman Sachs and JB North & Co are advising Santos financially.

Key Decisions for Investors

• Investors should acknowledge the significant premium offered in the XRG Consortium's non-binding proposal, reflecting a strong potential valuation for Santos shares, while noting the company's advice that no shareholder action is currently required as the deal remains indicative and subject to numerous conditions.
• Monitor closely the progress of the confirmatory due diligence process, negotiations towards a binding Scheme Implementation Agreement, and the attainment of necessary regulatory approvals, as these are critical milestones and potential hurdles for the transaction's completion.
• Consider the possibility of a superior proposal emerging, as well as the implications of the current offer being described as 'final' by the XRG Consortium, and factor in that the cash offer price will be adjusted for any dividends paid by Santos prior to completion.