'Deep pockets' could help Abu Dhabi win regulatory approval for Santos bid, analysts say
SYDNEY: Abu Dhabi National Oil Company, preparing an $18.7 billion bid for Santos, is likely to face close scrutiny from Australian regulators worried about local gas supply, but could win them over with pledges to speed up new projects, analysts say.
Santos shares closed at A$7.73 on Tuesday, well below the $5.76 (A$8.89) per share proposed takeover offer for Australia's second largest gas producer announced on Monday, which analysts said indicated investors believe the deal will face trouble with regulators.
"It's not going to be smooth sailing yet," said Jamie Hannah, Deputy Head of Investments and Capital Markets at VanEck Australia, which owns shares in Santos. However, he added that the offer price "is very attractive and it's straight cash".
The bid, which would be the largest ever all-cash takeover in Australia, according to FactSet data, has landed at a time when Australia's Labor government is debating how to deal with a looming gas shortage on the country's east coast from 2027.
"We would expect the Foreign Investment Review Board (FIRB) to focus on Santos's key gas infrastructure as it relates to domestic gas supply," said Jarden analyst Nik Burns.
Santos' market share in eastern Australia is around 5%, with most of its gas output on that side of the country going to its Gladstone LNG export plant, analysts said. In Western Australia, where it runs two domestic gas plants and has a stake in a third one, it has a 24% market share.
The infrastructure assets were not major income-generating assets, so would be very hard to spin off to satisfy any regulatory concerns, said Hannah.
"This infrastructure is important for domestic gas supply in both markets. The government needs to decide if they are happy for this to sit in the hands of a foreign government," said MST Marquee analyst Saul Kavonic.
ADNOC BRINGS CAPITAL TO THE TABLE
On the positive side, Santos holds undeveloped resources, including the Narrabri project and Beetaloo shale gas, that could help fill the expected gas supply gap on the east coast.
The bidding consortium, headed by ADNOC's investment arm XRG, could argue it would develop those projects faster than Santos could under its plans to boost capital returns to shareholders, and reduce the risk of an east coast gas shortage.
"XRG might point to regulators that its larger balance sheet and funding capacity provides an opportunity to accelerate Santos' undeveloped growth assets," UBS analyst Tom Allen said in a research note.
Romano Sala Tenna, portfolio manager at Katana Asset Management, which owns Santos shares, said the market was being too pessimistic about regulatory hurdles.
"A large sovereign wealth fund effectively coming in with deep pockets" could pour money into Santos' undeveloped assets, he said.
"So I think that is a card that will be appealing to the Australian government."
XRG said on Monday that if the deal goes ahead, the consortium aims to build on Santos' legacy as a reliable energy producer "unlocking additional gas supply" and intends to "work closely with the existing management team to accelerate growth".
Another factor that could work in favour of the ADNOC-led consortium, which includes the Abu Dhabi Development Holding Company (ADQ) and U.S.-based private equity firm Carlyle, is a trade deal Australia signed last year with the United Arab Emirates, analysts said.
Australian Treasurer Jim Chalmers, who has the final say on approving major foreign transactions, said he would listen to the advice of the Foreign Investment Review Board on the deal.
Santos Chief Executive Kevin Gallagher declined to comment on the deal and regulatory concerns on the sidelines of a gas conference in Malaysia on Tuesday, other than to say he would "let the process take its course".
(Reporting by Scott Murdoch and Christine Chen in Sydney; Additional reporting by Sudarshan Varadhan in Kuala Lumpur; Editing by Sonali Paul)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Zawya
5 hours ago
- Zawya
Sharjah Chamber, Kazakhstan Consulate discuss strengthening strategic partnerships between private sectors
Sharjah: The Sharjah Chamber of Commerce and Industry (SCCI) engaged in discussions with the Consulate General of the Republic of Kazakhstan in Dubai and the Northern Emirates to explore ways to enhance economic cooperation and strengthen trade and investment relations between the two countries. The meeting emphasized the importance of fostering partnerships between business communities and private sector institutions to leverage high-potential investment opportunities across diverse industries in both nations. The discussions were held during an official visit by H.E Almaz Tasbolat, Consul General of the Republic of Kazakhstan in Dubai, to the Sharjah Chamber's headquarters, where he was received by H.E Abdallah Sultan Al Owais, Chairman of SCCI. The meeting was attended by Abdul Aziz Al Shamsi, Assistant Director-General for Communication and Business Sector at SCCI, and Dr. Fatima Khalifa Al Muqarrab, Director of International Relations Department at SCCI, along with several officials from both sides. During the meeting, both sides explored ongoing cooperation between Sharjah and Kazakhstan, focusing on strategies to advance economic ties through the exchange of trade delegations and the coordination of sector-specific exhibitions and events. These efforts aim to facilitate access to investment prospects for companies and investors in both markets. The discussions also highlighted priority sectors that offer strong potential for collaboration, with the real estate sector taking particular prominence. In his remarks, H.E Abdallah Sultan Al Owais reaffirmed the Sharjah Chamber's commitment to enhancing trade and investment relations with Kazakhstan and facilitating high-quality services that support the success of Kazakh enterprises operating in Sharjah. He encouraged Kazakh companies to explore the emirate's investment landscape, highlighting its pro-business regulatory environment, robust infrastructure, and strategic geographic location as key drivers of sustainable growth. For further information, please contact: Ali Elgendy Misbar Communications ali@ Ahmad Aldwairi Misbar Communications
Zawya
5 hours ago
- Zawya
Egypt assumes vice presidency of the International Gas Union, paving the way for 2028 presidency
Mohamed Fouad: The Egyptian Gas & Energy Association has launched an advisory council comprising senior leaders from both public and private sectors and international partners. Karim Shaaban: We aim to enhance internal integration among the IGU's committees to ensure its initiatives align with member states' priorities. Cairo — For the first time ever, Egypt has officially assumed the position of Vice President of the International Gas Union (IGU) through the Egyptian Gas & Energy Association. This step paves the way for Egypt's upcoming presidency of the next triennium (2028-2031). This role reflects increasing international confidence in Egypt's capabilities to effectively contribute to shaping the future of global energy, marking it as the first country from Africa and the Middle East to hold this prestigious position. Eng. Khaled AbuBakr, Chairman of the Egyptian Gas & Energy Association (EGEA), has taken up the role of IGU Vice President. In this capacity, he participates in all meetings and activities of the IGU and the Executive Committee. He also represents the IGU in the ongoing gas debates, such as the G7, G20, and UN Climate Change Conferences, in addition to the major international conferences, to advance its strategic vision and enhance its global influence. Eng. Mohamed Fouad, Secretary General of EGEA, serves as the Egyptian Presidency Team Director for the IGU, in addition to his role as Chair of the National Organization Committee for the 2031 World Gas Conference (WGC), which is to be held in Egypt. Meanwhile, Eng. Karim Shaaban, Head of the Strategy and Planning Committee of EGEA, holds the position of Vice Chair of the Coordination Committee and a member of the Executive Committee of the IGU. His responsibilities include overseeing the work of the IGU's committees and contributing to the preparation and submission of the Triennial Work Programme (TWP) to the Executive Committee. In this context, Eng. Khaled AbuBakr, Vice President of the IGU and Chairman of EGEA, stated: 'From Egypt and Africa, we embark to power the whole world with secure and clean energy. This leadership role represents a significant step through which we intend to enhance energy security by developing gas policies and infrastructure, improving the Gas industry's resilience to price volatility, providing necessary investments, and accelerating the transition towards more sustainable energy sources. We are fully committed to coordinating with the Italian Presidency of the IGU to ensure the Union's objectives are achieved during this phase.' Abubakr added: 'Through this position, we aim to transform the Egyptian experience into an international model to be emulated. This role enables Egypt to strengthen international cooperation and attract investment, supporting its pursuit of sustainable development and solidifying its role as a regional energy hub. We deeply appreciate the Egyptian government's support in securing this nomination.' Eng. Mohamed Fouad, Secretary General of the Egyptian Gas & Energy Association (EGEA), also outlined the Association's expanded strategy, which extends beyond natural gas to include low-carbon technologies and renewable energy. This expansion stems from the EGEA's strong belief in the importance of a balanced and inclusive energy transition. Fouad added, "The Association has launched its new Advisory Board, comprising a distinguished group of senior leaders from both the public and private sectors, as well as international partners operating in Egypt's energy and gas sector. The private sector will provide deep insights into market trends and investment opportunities, while the public sector will ensure initiatives align with regulatory policies." For his part, Eng. Karim Shaaban, Vice Chair of the Coordination Committee and member of the Executive Committee of the IGU, and Head of the Strategy and Planning Committee of EGEA, stated: "Through this committee, we aim to enhance internal integration among the IGU's committees and working groups, ensuring its initiatives align with member states' priorities. We also contribute to preparing the program for the 2028 World Gas Conference and collaborate with the leadership of the R&D and Innovation Committee to formulate sessions for the International Gas Research Conference (IGRC). These efforts contribute to elevating the Union's standing in the global gas industry." As a result of winning the presidency of the International Gas Union (IGU) for the 2028-2031 term, Egypt is set to host the 31st edition of the World Gas Conference (WGC) in 2031, marking the IGU's centenary anniversary. This event stands as the global gas and energy industry's most significant gathering, convening top experts and decision-makers to delve into the sector's primary challenges and opportunities. Hosting the WGC will underscore Egypt's leadership in energy transition and technological innovation, along with its initiatives to establish a regional green energy hub, ultimately bolstering its standing as a prime destination for investment and tourism.
Khaleej Times
5 hours ago
- Khaleej Times
Amazon exercises option to acquire direct stake in Valu
U Consumer Finance SAE, known under the trademark Valu, a subsidiary of EFG Holding, and EFG Holding have announced that Amazon has agreed to exercise its option to acquire a direct equity stake in Valu. In May 2022, Amazon entered into an option agreement with EFG Holding, acquiring $10 million of EFG Holding GDRs, with the option to convert such GDRs into a direct stake in Valu, equivalent to 4.255 per cent of its share capital, upon a qualified liquidity event. The exercise of that option, based on the terms and conditions of the option agreement, will result in Amazon owning approximately 3.95 per cent of Valu. The transaction will be executed on the first trading session of Valu shares on the Egyptian Exchange at a price per Valu share of EGP 6.041 through the block trade mechanism, following receipt of the necessary approval. Karim Awad, Group CEO of EFG Holding, said: 'We are proud to witness Amazon's decision to acquire a direct stake in Valu, a testament to EFG Holding's proven ability to build greenfield ventures that evolve into pioneering market leaders. This milestone underscores our unwavering commitment to our shareholders, as we continue to create and manage businesses that deliver exceptional value and long-term rewards. Valu's success exemplifies our dedication to driving financial inclusion and digital transformation in Egypt and beyond, while solidifying our position as a catalyst for innovation and growth in the region.' Walid Hassouna, CEO of Valu, stated: 'This milestone stands as a powerful testament to the resilience and adaptability of our business model, a model that is versatile, agile, and perpetually evolving to meet the dynamic needs of our diverse client base and partners. At Valu, we remain unwavering in our commitment to redefining the customer experience through cutting-edge financial solutions that empower individuals and businesses alike, driving both convenience and opportunity in every interaction.' Maged El Ayouti, Co-Head of Investment Banking at EFG Hermes, commented, 'We take immense pride in having played a pivotal role in facilitating Valu's remarkable journey from securing a strategic investment from Amazon to delivering Valu's anticipated landmark debut on the EGX. These milestones stand as a testament to the power of our advisory expertise in helping companies achieve transformative growth and expansion.' Valu was listed on the EGX on May 21. The shares will be admitted to trading on the EGX on June 23. EFG Hermes acted as the sole financial advisor to EFG Holding and Valu on the transaction.
