Abu Dhabi XRG Pulls Out of $19 Billion Santos Takeover What Went Wrong?
Global energy markets were abuzz with anticipation when news first broke that Abu Dhabi’s National Oil Company (Adnoc), through its spinoff XRG, was in advanced talks to acquire Santos Ltd., one of Australia’s largest natural gas producers. The $19 billion deal promised to reshape energy ties between the Middle East and Asia while marking a bold step in Abu Dhabi’s global expansion strategy. But on September 17, that excitement fizzled as XRG confirmed it was walking away from the blockbuster takeover after failing to iron out crucial details.
The decision underscores the complexities of high-value, cross-border energy transactions, particularly at a time when global energy markets are shifting and geopolitical pressures are intensifying.
Why the Deal Collapsed
XRG described its decision as the outcome of a “combination of factors.” Insiders revealed that disagreements around valuation and tax liabilities were at the heart of the collapse. Specifically, Santos had sought assurances that XRG and its partners would bear potential capital gains tax burdens arising from the sale, a sticking point that neither side could resolve.
This isn’t the first time Santos has faced challenges with suitors. The company has previously turned away bids from Harbour Energy and seen negotiations with Woodside Energy falter. While Santos’ board initially recommended XRG’s $5.76-a-share proposal—a generous 28% premium at the time—investor skepticism loomed large. Shares never climbed to meet the proposed price, signaling doubts about whether such an ambitious deal could really close.
Energy analyst Saul Kavonic summed up investor sentiment succinctly: “If XRG, a less price-sensitive buyer, still couldn’t make the deal work, then questions will certainly be raised about Santos’ valuation.”
XRG’s Ambitious Expansion
Launched just last year, XRG was designed as a bold extension of Adnoc’s strategy to diversify beyond crude and strengthen its foothold in the liquefied natural gas (LNG) and chemicals sectors. With billions in backing from Abu Dhabi, the unit was set to become a heavyweight in global dealmaking.
The Santos acquisition would have given XRG stronger access to Asia’s fast-growing LNG markets and cemented its position as a global player. But while XRG has sealed supply agreements in the US and Africa, its attempts at larger acquisitions have proven more complicated.
For example, its long-drawn pursuit of German chemical giant Covestro AG is now under threat from European Union competition regulators. The Santos setback adds another dent to XRG’s aggressive expansion narrative, underscoring how tough it is for even the most well-capitalized firms to navigate global dealmaking landscapes.
Local Resistance and Political Pressures
Beyond valuation issues, the deal faced domestic opposition in Australia. Labor groups such as the Offshore Alliance had campaigned against the sale, urging the government to keep Santos “in Australian hands.” With Santos already playing a key role in the country’s energy sector and holding ambitious expansion plans, concerns about foreign ownership stirred public and political unease.
While insiders insist that regulatory hurdles did not kill the deal, the broader political climate likely added another layer of complexity for the buyers.
What’s Next for Santos and XRG
For Santos, the collapse of negotiations raises fresh concerns about its long-term valuation. The company’s American depositary receipts fell as much as 9.5% following the news, reflecting investor disappointment. CEO Kevin Gallagher, however, remains committed to his ambitious plan to boost output by 50% by the end of the decade, though some investors remain cautious about returns.
XRG, on the other hand, insists that this is not the end of its global shopping spree. With $120 billion in assets recently transferred from Adnoc to fuel its ventures, the firm maintains a “rich and deep pipeline” of potential acquisitions. Its ambitions now turn toward gas-producing assets in the US, as well as energy infrastructure to support the rapidly growing demand from data centers.
A Lesson in Global Dealmaking
The failed $19 billion Santos acquisition is a reminder of how ambition alone cannot seal a deal in today’s complex global energy market. Valuation disagreements, domestic sensitivities, and regulatory hurdles can derail even the most well-funded suitors.
For Abu Dhabi, the retreat is notable but not terminal. XRG still holds immense financial firepower and a clear mandate to grow globally. For Santos, however, the episode reopens old questions about whether its valuation and aggressive growth targets are realistic in the eyes of potential partners and investors.
What remains clear is that both companies continue to sit at the center of a fast-changing global energy market—one that demands agility, strategic foresight, and above all, patience.
Disclaimer: This article is based on publicly available information and industry reports. It is intended for general informational purposes only and should not be taken as investment, financial, or business advice
